Last Wednesday (7), Central Bank raised the basic interest rate to 14.75% per year; Collegiate kept his next steps open
The Central Bank’s Monetary Policy Committee) indicated on Tuesday (13) that it will be cautiously in its upcoming decisions on the basic interest rate, A 14.75% per year-the highest level since 2006. Last week’s minutes show that the committee sees initial signs of deceleration of economic activity, in line with the expected effect of high interest rates, but the risks to the risks, but the risks to Inflation follow high and the global scenario remains uncertain.
According to Copom, the discharge of interest has already made impacts on the exchange rate, business balance sheets and job market indicators. These effects, considered necessary to bring inflation to a goal of 3%, should intensify in the next quarters. The goal is considered fulfilled if the vary between 1.5% and 4.5%. Despite the expectation of slowdown, the committee pointed out that the current scenario “prescribes” a “significantly contractionist” monetary policy for a prolonged period
The Minutes also mentioned the recent creation of private payroll loans – a modality that allows automatic discount on the payroll of private companies – as a factor that temporarily raises the available income of the population by exchanging expensive debts for cheapest. Copom recognized a possible positive impact on growth, but considered the initial effect limited and still surrounded by uncertainty, as the program is in the early stages. In addition, the Committee warned that this measure may represent a structural change in the credit market, which will require continuous monitoring to evaluate its effects on economic activity and the fight against inflation.
Copom pointed out that the fiscal stimulus of recent years continues to press the economy. Although a fiscal policy that helps reduce the rising risk and acts in a countercyclic manner can collaborate with the control of inflation, the committee sees the current posture of the government as an expansionist, which makes it difficult for monetary policy. Economists agree that tax stimuli remain one of the main risks of discharge for inflation. The collegiate also drew attention to the uncertain international environment, especially the US commercial policy – especially the new ones imposed by Washington – which can affect global production chains and impact investment and consumption decisions in many countries.
In the BC’s evaluation, this scenario requires even more caution in conducting monetary policy in Brazil, especially at a time when global financial assets are more volatile and international inflation can vary unevenly among countries. Faced with so many uncertainties, Copom kept its next steps open. Part of the market bets on maintaining Selic at 14.75% at the next meeting, while another part does not rule out a percentage 0.25 residual discharge if inflationary risks increase. The committee emphasized that the decision will depend on the evolution of economic data and will continue to be guided by the search for the convergence of inflation to the goal.
Posted by Felipe Dantas
*Report produced with the aid of AI
