The dollar closed with a slight drop of 0.08% this Thursday (14), at R$ 5.7877, with investors waiting for the federal government’s spending cut package and anticipating possible effects of the proposals of the president-elect of the States United, Donald Trump, in the economy.
The Stock Exchange closed close to stability and had a slight positive variation of 0.05%, at 127,791 points.
The market continues to wait for the release of the Luiz Inácio Lula da Silva (PT) government’s expense containment measures, now in the third week of discussions.
Speaking on Wednesday, the Minister of Finance, Fernando Haddad, said that the package is already ready and that the announcement depends on President Lula.
To journalists, he did not want to answer what the impact of the package will be on public accounts, but stated that the value is “significant” and indicated that the effects will be noticed in the short and medium term.
“More [importante] than the number, in my opinion, is the concept that we use to make this idea prevail that things should, as far as possible, be incorporated into this general vision of the framework, so that it is sustainable in the future. time,” said Haddad.
Approved in 2023, the fiscal framework allows the federal government’s primary spending to grow at a maximum of 2.5% above inflation per year, respecting a pace of up to 70% of the increase in revenues.
The minister said he discussed the general outline of the initiatives with the president of the Chamber, Arthur Lira (PP-AL), in addition to debating specific measures with the Ministry of Defense. According to him, the government is evaluating whether it can include more measures in the package to be sent to the National Congress.
“As soon as Lula gives authorization, we are ready to publicize the details of what is already being said here,” said Haddad.
Rumors that the package could be worth more than R$40 billion began to circulate among trading desks, with investors crediting internal government sources. “This was exciting, mainly because the market likes a number to be able to do the math and estimate what the impact will actually be,” says Matheus Massote, foreign exchange specialist at One Investimentos.
Investors are targeting cuts of between R$30 billion and R$50 billion. For economists at Itaú Unibanco, at least R$60 billion are needed -R$25 billion in 2025 and R$35 billion in 2026- for the market to have more confidence in the fiscal adjustment proposed by the government.
The announcement is expected to take place next week, at the end of the G20 events, in Rio de Janeiro.
Until then, the exchange rate sessions “should be volatile, because the market will pass on the rumors that arrive”, says Massote.
In an interview with Folha de S.Paulo, the president of the BC (Central Bank), Roberto Campos Neto, said that there is a rush to present a package capable of reversing the worsening of Brazil’s risk perception.
For him, there are two paths: cutting “meat” expenses in 2025 and presenting measures that indicate to economic agents that the fiscal framework will be structurally more sustainable in the future.
He also stated that the delay in the announcement leaves scars along the way, like wasted investments. “The longer you wait, the more you end up having to do. The shock that needs to be produced later is greater”, said Campos Neto.
And, if the shock has “an impact on macroeconomic variables in such a way that it reduces the risk premium”, he said it is possible that the fiscal impact will affect the direction of interest rate policy until the end of the year.
The Selic rate, currently at 11.25% per year, had its cycle of increases restarted by the BC’s Copom (Monetary Policy Committee) in September, due to the unanchoring of inflation expectations – partly attributed to fiscal risk.
On the international scene, investors are pricing in the possible effects of Donald Trump’s proposals for the economy.
The Republican promises to increase tariffs between 10% and 20% on practically all North American imports, including those coming from allied countries. For Chinese products, the promised increase is at least 60%.
Tariffs inhibit global trade, reduce exporter growth and weigh on public finances for all parties involved. They are likely to increase inflation in the United States, forcing the Fed (Federal Reserve, the North American central bank) to act with high interest rates for longer – which strengthens the dollar.
The projections of Trump’s proposals for the economy have adjusted investment positions in global markets. The movement is called “Trump Trade”, which tries to predict which assets will be most favored by the Republican’s economic policy.
So far, stocks on Wall Street, US Treasury bonds, the dollar and cryptocurrencies have appreciated – in some cases, to record levels.
At the same time, inflation data from the United States continues to indicate to the market that the Fed will continue to cut interest rates at the next monetary policy meeting in December.
At last week’s meeting, the city council reduced interest rates by 0.25 points, to the range of 4.50% and 4.75%.
In October, the consumer price index increased by 0.2%, and, in the last 12 months, the increase was 2.6%, compared to the 2.4% recorded in September. The result was exactly in line with what was expected by economists consulted by Reuters.
For Keone Kojin, economist at Valor Investimentos, the Fed should not change the probability of reducing interest rates by 0.25 percentage points, but “nor should it reject or rule out the possibility of, at a next meeting, maintaining these interest rates instead of reducing them. them.”
Producer prices also rose in line with expectations, according to a report released this Thursday. The PPI, its acronym in English, increased 0.2% last month and 2.4% in the last 12 months.
