President stated that the monetary authority will continue to make technical decisions without his presence
The president of BC (Central Bank), Roberto Campos Neto, said this Tuesday (Aug 20, 2024) that it is necessary to concentrate “all forces” to make a smooth transition in command of the monetary authority. His term ends on December 31, 2024. It will be up to the president Luiz Inácio Lula da Silva (PT) indicate the next commander.
Campos Neto stated that, after leaving, he does not want to remain in the public sphere. According to him, he will do “something mixing finance and technology”. He participated in the event “Macro Day 2024”organized by BTG Pactual.
“I hope that my successor will not be criticized or judged by the color of the shirt he wears, or whether he went to the party or whether he participated in a tribute in one way or another. And that he will be judged by the technical decisions he made.”said Campos Neto.
According to him, whoever is in charge or presidency of the Central Bank must be “close” of governments and congressmen to approve projects. He was criticized for having attended a dinner with Tarcisio de Freitas (Republicans) and voted in 2022 with a green and yellow shirt. “You need to be able to differentiate between proximity and autonomy and independence,” he said.
SELIC RATE
Campos Neto said again that the monetary authority will raise interest rates if necessary. He stated that the monetary authority’s task is “don’t look so much” for short-term noise that causes volatility in financial assets and act with caution.
“We will do what we have to do. If we need to raise interest rates, we will raise interest rates.”said Campos Neto. He stated that the directors of the Central Bank decided not to give any indication of what will be done at the next meeting. They will wait for more data on inflation and other indicators to make the decision.
The president of the BC assesses that the Central Bank spent a “huge time” to reverse the perception among financial agents that Copom (Monetary Policy Committee) decisions were polarized for political reasons.
“I have never seen such a good team spirit at the Central Bank as in the last few meetings. We understood that there was a problem that caused noise. Part of the prize [de risco] having fallen was to pass this [mensagem de] organization. The Central Bank will always pursue the goal, raising interest rates if necessary, regardless of whether I am at the Central Bank or not.”he said.
SELIC OF 10.5%
Campos Neto declared that the BC “fixed” some “understandings” between the statement and the last Copom minutes that were not “in line” with what the monetary authority wanted to convey.
“We had some stronger numbers on the local side and we had an external situation that I think is heading towards a better outcome, despite the recent volatility”he said.
The base rate, the Selic, is at 10.5% per year. On July 31, 2024, the Central Bank kept the base interest rate at the same level for the 2nd consecutive meeting. The monetary authority is working with the possibility of raising interest rates in 2024 to control financial market agents’ expectations for inflation. This Monday (August 19, 2024), the Focus Bulletin showed that analysts increased the estimate for the IPCA (Broad National Consumer Price Index), which measures the country’s official inflation, to 4.22%. It is increasingly close to the ceiling allowed by the target, which is 3% and has a tolerance of up to 4.5%.
INTERNATIONAL SCENARIO
Investors are expecting the start of interest rate cuts in the United States in September. The country’s inflation has come close to the target of 2%. In July, the accumulated rate over 12 months fell to 2.9%. The reduction in interest rates provides greater stimulus to the economy and a greater appetite for risk in investments.
He commented on the volatility in global financial assets in August. Campos Neto said a weaker set of data on US economic activity had caused nervousness among financial agents and “disorder” in the markets.
“There was an expectation that perhaps the slowdown in the United States would be a little stronger. I think it was super hasty, because we had [a divulgação] of an employment data and some local data in the US that caused this to happen”he declared.
Campos Neto said that financial agents have come to understand that there is less room for policy “countercyclical“if there is a stronger slowdown in the economy.”If, in fact, there is a major slowdown, governments no longer have as much fiscal space and central banks will have a hard time [de atuação]much higher to bail out the markets again”he stated.
The president of the BC said, however, that the scenario that prevails among investors’ expectations is ““Organized deceleration” in the United States.
“In this sense, I think the external side has improved. We have the issue of the American election, China, protectionism, trade fragmentation and several issues that are inflationary in the medium term, but, looking at what has happened in the last 6 and 7 weeks, I think the external side has improved, because for me the main risk was that there would be no interest rate cut or that it would be delayed for a long time.”he declared.
Campos Neto stated that high rates in the US would have an impact on high US debt, which would potentially extract liquidity from the market in a “very large volume and very fast speed”.
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