13/12/2023 – 8:04
The central banks of Brazil and the United States will meet for the last time in 2023 to define their respective interest rates in the well-known Super Wednesday. While North America is on a trajectory of monetary tightening and maintaining the level, here there was a succession of drops in rates after around 2 years above 13% percentage points. According to analysts, both countries should stay the course and close 2023 in line with expectations, although they will be outside their respective inflation targets.
+ IPCA rises 0.28% in November, compared to an increase of 0.24% in October, says IBGE
The good news is that, after moments of tension between Roberto Campos Neto, president of the Central Bank, and President Lula (PT), the Selic rate, currently at 12.25% per year, ends the year closer to market expectations ( last Focus recorded a projection of 11.75% pa.). The downward cycle began in August, after seven consecutive meetings of the Monetary Policy Committee, keeping Brazilian interest rates at a bitter 13.75%.
“The fall in the Selic rate in 2023 is the beginning of a downward cycle process, this cycle took place with adjustments made to inflation, confirmation of certain expectations that were had regarding the approval of the tax reform, the fiscal framework and revenue measures taxes. This causes the general macroeconomic behavior to lead to this beginning of the cycle”, explains Gilberto Braga, economist and professor at Ibmec Rio.
The Broad Consumer Price Index (IPCA) for November came in at the expected median, with an increase of 0.28%; In the year, inflation measured by the index accumulated an increase of 4.04% and, in the last 12 months, of 4.68%, below the 4.82% observed in the immediately previous 12 months. In Campos Neto's defense, falling inflation would guarantee, among other elements – such as fiscal rules, for example – a cycle of falling interest rates.
For 2024, it is possible to expect, at least in the first months, the continuation of this policy of gradually reducing rates by 0.5% percentage points at each Copom meeting, with the possibility of decreasing. Braga reinforces what economists are not unanimous about in this case, but the rate tends to be between 9.25% and 10%, with a tendency towards 10%.
“What could falsify this and what makes experts believe that this limit will be closer to 10% per year is the possibility of a year with spending, expansion of public expenditure due to municipal elections and the president's own statements of the Republic in the sense that the fiscal target does not need to be met and that it is important to spend and carry out works”, assesses the professor.
The day before Super Wednesday also brought the US CPI, which measures the country's inflation: this time, the increase was 0.1% in November compared to October; in the annual comparison, there was an increase of 3.1% in November. From January to now, the Federal Reserve Bank (FED) has maintained the rate between 4.75% – 5.5%, and the expectation is to remain at that level. Goldman Sachs projects a drop only for the third quarter of next year.
“I believe that the CPI number does not impact the FED's decision, which should be to maintain interest rates at current levels. Despite a number within expectations and stagnation of inflation, the FED will probably comment in the statement that it is not yet close to the 2% target and thus hold higher interest rates for now”, assesses Marcelo Oliveira, CFA and co-founder by Quantzed. The FED announces the decision at around 3 pm (Brasília time); Copom publishes the note after 6pm.
Fixed income still in the sights of investors
On the market side, the drop in interest rates by another 0.5% in the last Copom of 2023 is not a surprise, it is also expected. “As a result, fixed income remains attractive in my view. Even more so in a scenario of high interest rates in the US, global fixed income has tended to remain attractive for some time. Not to mention that any rate higher than 10% per year is not worth throwing away”, says Ricardo Jorge, fixed income specialist and partner at Quantzed.
Jorge continues to recommend fixed income assets, the most requested and targeted in 2023. “For the individual investor, the incentivized ones are the best choices: LCI / LCA or even incentivized debentures. The recommendation is to choose the issuer carefully and not exceed the limit of the Credit Guarantee Fund, because they are exempt and low-risk products. Another point is that they generally pay more than other investments such as CDBs and public bonds, which is why I see more advantages”, he advises.
Despite falling, the Selic rate still remains at high levels and this helps fixed income to remain an attractive investment, as explained by Caio Canez de Castro, capital market specialist and partner at GT Capital. “In addition, fixed income has an increase in risk premiums and these remain at high levels. This continues to attract resources from investors,” he says.
In this scenario, pre-fixed assets, especially for the long term, since the reduction in the Selic rate is taken for granted, are already pricing in a large part of this fall, which is why for the short term the most attractive are post-fixed assets linked to the CDI.
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