The US currency rose by more than 1.01% this Tuesday (Dec 17); Copom signaled raising the Selic to 14.25%
The (Central Bank) acted again in the foreign exchange market this Tuesday (Dec 17, 2024). Announced a spot auction with a minimum lot of US$ 1 million, which will be sold on Thursday (Dec 19). Proposals were made from 9:36 am to 9:41 am.
The dollar reached R$ 6.16 at its highest this Tuesday (Dec 17, 2024). The day opened on a high after the release of the Copom (Monetary Policy Committee) minutes, which raised the basic rate, the Selic, to 14.25% in 2025.
On Monday (Dec 16, 2024), the monetary authority held 2 auctions to contain the rise in the dollar, but the currency was on the rise. The Copom minutes said that the scenario for controlling inflation, which was uncertain until the penultimate meeting, had become “more adverse”.
The Central Bank also stated that the perception of economic agents about the fiscal package affected “in a relevant way” asset prices and future expectations – especially the risk premium (future interest), inflation and the exchange rate. The monetary authority understands that there was a “unanchoring additional” of the projections, which makes the scenario more adverse and requires a tougher monetary policy.
“The unanchoring of inflation expectations is a factor of discomfort common to all members of the Committee and must be combated”said the minutes.
DOLLAR
The Central Bank said the exchange rate had “strong change” in the recent period. He argued that the depreciated real and the rise in the nominal and real interest rate curves makes the environment “more complex”.
The BC stated that the pass-through of the high dollar to prices increases when demand is stronger.
INFLATION
For the Central Bank, short-term inflation worsened, with food prices significantly impacting the IPCA (Broad National Consumer Price Index). He stated that the drought throughout the year and the rise in meat prices – affected by the beef cycle – put pressure on the rate in the short term.
“This increase tends to propagate into the medium term due to the presence of important inertial mechanisms in the Brazilian economy. Regarding industrialized goods, the recent exchange rate movement puts pressure on prices and margins, suggesting a greater increase in such components in the coming months”, these.
According to the BC, services inflation remains above the level compatible with meeting the target, which is 3%, with a tolerance of up to 4.5%.
