The signal from the Central Bank’s Monetary Policy Committee (Copom) that it should reduce the pace of monetary policy tightening did not change the market’s expectation of an increase of 1 percentage point for the Selic at the collegiate meeting in March, considering the median of the estimates compiled by Projections Broadcast – which would take the basic interest rate from 10.75% to 11.75% per year.
The possible change of route was signaled by Copom in a statement released on Wednesday to explain the Selic pull to 10.75%. The collegiate says that, at this moment, it seems more “appropriate” to increase less than the 1.5 point rhythm that prevailed in the last three meetings. The document, however, did not establish a market consensus on when the end of the cycle of increases should occur, with estimates divided between March and May 2022.
“The BC took a little more risk in this communiqué by adopting the possibility of reducing the rate of increase. We expected him to leave the possibilities more open, precisely due to the recent highs of inflation and pressure on prices”, said economist João Leal, from Rio Bravo Investimentos.
The economist predicts that the Selic will maintain the level of 11.75% until the end of 2022, with a gradual cycle of cuts only in 2023, taking the rate to 8.0% at the end of next year. “The BC should not risk reducing interest rates before having a clearer picture of what the next government will look like in fiscal terms”, he says. Leal expects inflation of 5.4% in 2022 and 3.3% in 2023.
MUFG Brasil is among the institutions that expect increases in the next two meetings of the collegiate, with a rise of 1 percentage point in March and 0.50 point in May, taking the Selic up to 12.25%. “We think it goes beyond 12% due to the need to coordinate well the inflation expectation and ensure that, especially next year, it stays within the target”, said senior economist Maurício Nakahodo.
Inflation
The economist forecasts inflation of 4% at the end of 2022, but explained that several vectors are likely to put the Broad National Consumer Price Index (IPCA) above this level, such as the international price of oil and the impact of rains on grain crops. , in addition to the recovery of the economy after the current wave of Ômicron. The economist’s scenario predicts the beginning of the Selic cuts cycle only in 2023, with a rate of 8.25% at the end of the period.
The chief economist at Banco Alfa, Luis Otávio de Souza Leal, raised the projection for an increase in interest rates in March, from 0.75 percentage point to 1.0 point, with Selic up to 11.75%. For him, the Copom used the February communiqué to limit more extreme estimates. “The fact that I said I was going to slow down the pace took the extremes out makes it less likely to go below 11.75% or above 12.25%. It concentrated the estimates in this range,” said Leal. “The BC did it on purpose, so as not to lose its freedom, since the numbers have been surprising both on the activity side and on the inflation side. As he put it himself, it will depend on the next data.”
Leal’s projections considered that, with a slightly more favorable scenario of inflation and activity, the BC would have room to end the cycle in May.
The information is from the newspaper. The State of São Paulo.
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