The President of the Republic, Luiz Inácio Lula da Silva (PT), received at the Palácio do Alvorada, on Monday (30), the current director of Monetary Policy at the Central Bank (BC), Gabriel Galípolo, to sign his term of office .
Once the appointment decree is published, Galípolo will be able to take over as mayor from Wednesday, January 1, 2025.
The passing of the baton is the first under an autonomous BC. The process was turbulent at first, with resistance from the government and its base, with attacks directed at the president of the body at the time, Roberto Campos Neto.
Between comings and goings, from BC and that.
The proximity between Galípolo and the Executive – which he served as executive secretary of the Ministry of Finance – was questioned by the financial market. Economists heard by CNNhowever, assess that this problem appears to have been overcome.
“[A proximidade de Galípolo com Lula e o ministro da Fazenda, Fernando Haddad] it can be a good thing in the sense that it can bring the reality of the risks that the Brazilian economy will face this year due to this fiscal issue and can bring this reality to Planalto”, said Tony Volpon, former director of the BC and columnist for CNN Money.
Volpon assessed the work seen by Galípolo as “extremely technical and in fact quite positive”.
For Sérgio Goldenstein, chief strategist at Warren Rena, the toughest speech adopted by the monetary authority in recent months reinforces an image of commitment to the BC’s mission of controlling inflation through the bitter medicine that is rising interest rates.
“Therefore, we can see an effort on his part to show that he will act autonomously and thus gain credibility. However, there remain doubts about how it will react if activity slows down more than expected”, asked Goldenstein.
“In any case, the main reason for the de-anchoring of expectations is not a possible fear of a more lenient Central Bank towards Galípolo, but rather a fiscal policy that is not seen as sufficient to stabilize the debt/GDP ratio over the next few years”, concluded.
Because of this scenario, the only certainty that the chief strategist claims to have is that the Selic, the country’s basic interest rate, will reach an even higher level in 2025.
This year, interest rates closed at a higher level than that seen at the beginning of 2024. After opening at 11.25% per year, rates initially fell, but began to accelerate until they closed the last meeting of the Committee on Monetary Policy (Copom) at 12.25%.
In its decision, the Copom pointed out that the Selic should reach up to 14.25% in March. Warren Rena projects a Selic of 14.75% at the end of the hardening cycle.
Volpon reinforces that the new BC president takes office at a complex time, marked by fiscal uncertainties that impact monetary policy. As for economic projections for 2025, the columnist for CNN Money assessed that, if there is a positive fiscal direction with new measures announced at the beginning of the year, the market could react well, even allowing interest rates to fall until the end of the year.
On the other hand, if “denialism” prevails regarding the need for new fiscal measures, the market should react with a bad mood, which could result in new peaks in the dollar throughout the year.
“So it’s a bit of a binary scenario, it will depend on the attitude. Here at the end of the day, whoever is making these decisions is the President of the Republic”, concluded Volpon.
