Monetary authorities from the United States and Brazil start on Tuesday (17) the first of two days of debates to define the next interest step, with analyst predicting the maintenance of rates at current levels.
The decisions of the Federal Reserve (Fed) and the Central Bank (BC) will be published on Wednesday (18), with the expectation that interest will be maintained between 4.25% and 4.5% in the US and 14.75% in Brazil.
According to the CME Group’s Fedwatch tool, which monitors market expectations, 99.8% of agents bet on maintenance at this Fed Meeting. The perception is that US interest rates should be lowering again in September, when 57.2% of investors foresee interest between 4% and 4.25%.
The new round of interest debate takes place in the midst of a scenario of uncertainty in the international scenario with the recent exchange of attacks between Israel and Iran and the effects that the continuity or escalation of conflicts will have the price of oil.
The new front of tension takes the place of the fears of the Washington and Beijing trade dispute, who have cooled in recent weeks after signs to formulate an agreement between the two superpowers.
Still, the uncertainties of the economic impact that tariffs can cause in the world economy follow the radar of investors.
The domestic scenario also has dubious signs: while the labor market is still warm – tending to Selic’s new discharge – data from economic activity in the first semester already give signs of slowing down the recent interest rise cycle.
With this in mind, Itaú ponders that should continue to keep the tone of caution and data dependent – Maintaining the flexibility for the committee to make decisions based on the economic data that will come with each meeting.
“We evaluate that the risk balance for inflation should follow balanced, with risks to both sides and variance greater than usual. In this context, we hope that the committee reinforces the commitment to the convergence of inflation to the goal, following the strategy of remaining with the interest rate interest rate for prolonged period and signaling that it will not hesitate to resume the high cycle if the prosecutable scenario of inflation deterioore, “the bank says in a statement.
In a scenario where Selic is maintained at 14.75%, Itaú projects inflation reaching 3.3% on the relevant horizon, “probably close enough from the goal to the committee.”
End of monetary tightening?
The market has maintained the expectation that the BC Vai Monetary Policy Committee (Copom), which should continue until the beginning of next year, according to the Focus Bulletin.
On the other hand, financial market positions suggest a contrasting forecast with the weekly survey.
Last Friday (13) -the latest update -, against 42% of probability of maintenance.
Although these percentages are closer in the last sessions, suggesting an almost division of what BC directors will do, they express a considerable change in the bets since the end of last month. On May 27, the pricing of copom options was only 14.5% of chances of high and 83% probability of maintenance of Selic.
In this line ,.
“Indicators of economic activity have been resilient, while services inflation remained pressed, with no more consistent signs of moderation. These factors, added to the persistence of the discouraging of inflation expectations, reinforce our assessment that residual adjustment will be required at the next meeting,” he says in a report.
BC’s latest communications were leaving the door open to the possibility of new highs. The clearer signs – and fueled the bets that Selic can still rise – came from the president of the municipality, Gabriel Galipolo, earlier this month.
“What we are going to make a decision. Flexibility means that we are open to the next meeting to make this decision on what to do,” Galipo said at an event at the Public Policy Debate Center (CDPP).
