A year ago, important: define the model of O; face low coordination with fiscal policy; and navigate a global scenario of uncertainty and higher interest rates.
Twelve months later, there was no shortage of tests: the frustration of the market with the posterior currency shock; The “Collection” IOF of June by taking the external remittances of capital for a few hours; ; a. The question is not whether the BC was “hard” or “mild”, but a good use of the instruments at its disposal to fulfill the mandate.
The first challenge, the transition from the presidency and two other members, was fulfilled with relative tranquility. The defense of the institutional purpose spoke louder and, still in the transition, the directors announced a shock of interest, continued by the new committee. -A 450-base jump that brought a differential of extremely high interest rates compared to other countries.
Earlier this year, the expectations of inflation for 2025 reached 5.6%, the currency was depreciated, the fiscal policy frustrated the expectations of expense adjustment and the activity was overheated.
Copom reacted firmly, improved communication and became more dependent on current data assessment, reducing future interest rates (“Forward Guidance”). In all meetings there was consensus and the interactions of the directors with the general public were more aligned, respecting the nuances in the emphases and reflections of each.
The monetary policy has located Brazil with interest differentials above 800 points, in real terms, in relation to the United States. This favored us when, especially the reciprocal. Since January this year the global dollar has lost 10% of its value, helping to appreciate the real.
Hard measures and the consistency of monetary policy so far begin to yield fruits. And there was also help with the weakening of the dollar, which increased flows to emerging countries and reduced pressure on their assets. Internally, the tax enforcement brought some relief, with deficits minor than those planned and some surprise in the collection. With each new program with increased primary spending, use of public funds or promise of resignation, markets count future tax deterioration points.
Although gradually, there is a clear convergence of inflation expectations. According to BC’s Focus Bulletin, the median market estimates a very slow misinflation, from the current 4.8% estimated to 2025 to 4.2% on the monetary policy reference horizon (six quarters ahead) and to 3.5% only in 2029, ie still above the 3% target. In the interest curve, implicit inflation is negotiated above 5.5% in 2029, in the same way not converging to the goal, even if the “deadline awards” discounted.
What has happened so far is sufficient to improve expectations, but insufficient to ensure structural control of inflation. There is still no room in the installed capacity of the economy and the BC calculation models for this measure diverge from those of the market. But gradually, these accounts are also approaching, and finally, the signs of deceleration of the activity begin to get clearer.
The comparison with the United States is inevitable. There, implicit inflation in interest rates of five years is around 2.5%, also above 2%; There is uncertainty about the impact of tariffs, which has partly being absorbed on the banks of exporters / importers. The Fed deemed it necessary to change the goals regime, abandoning at the Jackson Hole conference the previous framework, which allowed tolerate overshooting temporary inflation and make a more gradualist adjustment.
Yet . If in the US the challenge is of fine adjustment and not losing credibility, here we still fight to reduce the difference of almost two points compared to the official goal, but we are in the opposite direction of credibility gains.
None of this means that the work is completed. Next year promises to be more challenging. The Fed will go through two more chair changes in their board. And, in the background, the world faces a climb of tax risks: larger debt, high interest rates and less market tolerance.
At home, there will be elections that tend to enhance tax topics for almost binary vision (adjusting or without adjustment). It will be up to the BC to draw the beginning of the loosening cycle: when it starts, where, space, and which counterweights in communication. The credibility gained in one year can get lost in a poorly calibrated decision.
The balance of this first year is of resilience. The BC faced turmoil, but brought expectations closer to the goal. However, credibility is process. It is built with perseverance, discipline and consistency. If the first year was definitions, the next will be trial and statement.
Navigation continues. The Central Bank holds the compass firmly, but the sea remains angry. It is always in the storm that the solidity of the helmsman is discovered.
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