The BC (Central Bank) Copom (Central Bank) Copom (Central Bank) will hold, from this Tuesday (29), its fifth meeting this year. But although there is almost certainty as to the decision that will be made, the market diverges as to what Donald Trump’s tariff against Brazil can mean, in the long run, for the work of the monetary authority.
It is a consensus in the market that the decision on Selic will be maintained, which measures the country’s basic interest rates, to be released on Wednesday (30). In his last meeting, in June, the collegiate graduated by the municipality’s directors raised Selic to 15% per year.
Any decision that is not to maintain interest where they are “would be a surprise” for JP Morgan analysts, who point out that the BC is expected to comply with the interruption signs of the monetary tightening cycle at this meeting.
“With very few public appearances recently, it seems that the members of the BCB council are comfortable with the ‘high -term’ message that has prevailed in recent communications,” the bank wrote in a report.
In its last decision, the Copom stressed that it should maintain, in order to bring inflation to the goal of 3%,.
If the expectations of the market avenge, at the second meeting of next year, putting Selic at 14.5%, as stated in the last calculation of the Focus Bulletin, updated on Monday (28).
Favorably to the BC, “data since the last Copom meeting were mostly benign for inflation prospects,” according to XP report.
IPCA (Broad Consumer Price Index) readings, which measures the high prices in the country, in line or below expectations; Wholesale deflation, which signals a transmission of long -term improvement to the ordinary citizen; And signs of slowdown in domestic activity, although still solid, are some of the points listed by the economists of the Investment House.
In short, XP estimates that “data and news since the last meeting must convince the copom that monetary policy is sufficiently compensation with the Selic rate at the current level.” However, it points out that “the impact of US tariffs should also be monitored by the committee.”
“The direct impact tends to be misinflationary (lower global demand and higher domestic offer). However, i) the real can devalue if the crisis gets worse and ii) an eventual – although unlikely – retaliation of the Brazilian government with US import tariffs would be inflationary,” the report points out.
Tariff and future of monetary policy
A CNN found that. The rate that should be effective from the day.
“The realization of tariffs recently announced by the US government reduces space for currency appreciation, despite the global environment of weak dollar. On the other hand, these tariffs increase the likelihood of faster weakening of the economy. In net terms, the risks seem to weigh more in the direction of early interest cuts,” says Itaú report.
Servants of the monetary authority admit that the damage to exporters must contain the growth of GDP (Gross Domestic Product) in some tenths, a relevant shock, but would not lead to structural distortions. .
“If Brazil decides to retaliate and apply higher rates to American products and services, this would be a potentially inflationary movement that could force Copom to adopt a more posture hawkish [dura, no jargão da política monetária]possibly further moving the start of Selic’s start, “says Paula Zogbi, nomad’s chief strategist.
“Since this retaliation is not yet the scenario most awaited by economic agents, for now, our view is that the effects tend to be limited for this week’s meeting, with a maximum of any mention of these risks in the statement,” he adds.
ASA economist Leonardo Costa considers the tariff “the greatest uncertainty of the moment”, arguing that “the statement [do Copom] It should reinforce the need to maintain high interest rates for a prolonged period, cite resilient activity, but in moderation, and maintain surveillance speech without making room for cuts. “
The outer scene had been included in the BC uncertainties radar for some time, and despite the recent loosening of interest outside the country, “an uncertain external scenario has a particularly significant impact in Brazil, given the potential for higher tariffs on its US exports,” Santander puts Santander in a report.
For Analysts at Banco Daycoval, Copom’s assessment of international economic reality will be the main point to observe this Wednesday, especially regarding the trade war over Brazil.
JP Morgan points out that BC’s communication should come in the line of “highlighting the uncertainty about any side effects of this potential shock rather than drawing conclusions at this time.”
Natalie Victal, chief economist at SulAmérica Investimentos, points out that care will be needed in writing, as the Copom is in danger of sounding softer about monetary policy than required by the market.
“If the Central Bank recognizes more explicitly the slowdown of the activity, mention signs of improving current inflation and/or highlight the low risk for inflation arising from trade war – via impact on economic activity – the market can interpret communication as softer than intended.”
More impact there than here
Copom does not make its decision alone on Wednesday. Accompanying the Brazilian monetary authority, the US Central Bank, the Federal Reserve.
Like the BC, the Fed should keep their interest and “whim in communication”, according to Professor José Francisco de Lima Gonçalves, from FEA-USP (Faculty of Economics, Administration, Accounting and Actuaria at the University of São Paulo), recognizing the uncertainty about the effects of new rates on inflation and activity.
For the United States, however, the situation is more delicate. “In Suma, USA, inflation is worse, albeit modest. The activity gives signs of recovery after the instability of the early months of the year. But, like consumer confidence, not convincing,” points out Gonçalves.
With information from Danilo Molitero, from CNN
