Monetary Policy Director says the Central Bank is “open” to the next meeting, but a possible increase in the Selic rate “is on the table”
The Director of Monetary Policy of the Central Bank, Gabriel Galípolo, said this Monday (Aug 12, 2024) that the minutes of the July meeting of Copom (Monetary Policy Committee) do not indicate how the board will treat interest rates in the next one. In the financial market, this “anticipation” is known as guidance.
“It is not the intention of these last minutes to provide guidance […] at each moment we will make an analysis, and the analysis on the monetary policy decision will be made there in front”declared Gallipolo in event 2nd Warren Day, held by the brokerage firm Warren Investimentos, in São Paulo.
The committee’s minutes signaled that the Central Bank needs to remain alert to signs of rising inflation. The document also says that the monetary authority will not hesitate to increase the Selic (base interest rate) if it deems it necessary.
According to Galípolo, the central indication of the text was to say that it is necessary to monitor the behavior of economic indicators and to make concrete decisions only during the collegiate meeting.
“What we tried to do in this last minute is a record of what we are seeing things now, but we remain data-dependent and open for the next meeting”he said.
Despite the observational tone, the director reiterated that a possible increase in the Selic rate is not 100% ruled out. He stated that everything will depend on the indication of numerous “variables”.
“We are willing to live with a more restrictive rate for longer, however, I was left with the feeling that this phrase […] was read as taking the possibility of discharge off the table. And that is not the reality of the Copom’s diagnosis. The discharge is on the table and we want to see how this will unfold.”
GALÍPOLO & THE PRESIDENCY OF THE BC
Galípolo is the most likely name to take over as president of the Central Bank in 2025, when Roberto Campos Neto’s term ends.
In a joking tone, Warren’s chief strategist introduced the director as “future president of the Central Bank” to the audience at the event this Monday (12th August).
This is what Gallipolo replied: “I know you are making this joke in a very affectionate way, but I need to reiterate that the president is Roberto Campos. He is exercising his presidency of the Central Bank to the fullest extent, in an extremely generous manner with all the directors. But the only person who can indicate who will be the next president of the Central Bank is the president of the Republic.”
Appointed by the president Luiz Inácio Lula da Silva (PT) in 2023, the head of the Monetary Policy Board has adopted a more technical discourse in the days following the July meeting. He constantly reinforces the fact that Copom wants to meet the inflation target above any other objectives.
There was concern in the market that Galípolo could be a more flexible candidate in relation to the political demands of Lula and his allies – who frequently criticize the Central Bank and call for a reduction in interest rates. With a tougher stance, the director is gaining traction with the market.
Read the infographic below to find out who the authority’s directors are and the length of each one’s term:
JULY COPOM
On July 31, the Central Bank decided to keep the Selic rate unchanged at 10.50% per year. This is the second time in 2024 that the body has made this decision – both times unanimously.
The Central Bank’s role is to keep Brazil’s inflation at the center of the target (3%) at the end of each year. One way to do this is by raising interest rates. More expensive credit slows down consumption and production. As a result, prices tend not to rise as quickly.
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