Conflict is cited as one of the main uncertainties in the scenario, due to the impact it may have on commodity prices, especially oil, and asset prices
The Copom and the Federal Reserve confirmed expectations. In the United States, the reference interest rate was maintained between 3.5% and 3.75% per year, in the second consecutive pause in cuts. In Brazil, the Copom cut the Selic rate by 0.25 points to 14.75% per year, as most of the market was already betting. The decision confirmed the signal from the previous meeting, beginning of the cutting cycle, but with a moderate cut.
In both cases, the war in the Middle East is cited as one of the main uncertainties of the scenariodue to the impact it may have on commodity prices, especially oil, and asset prices, such as specific pressures on the dollar, in Brazil. THE The fear is of a deviation from the predicted path for inflationof a de-anchoring of expectations of convergence towards the goal. The market here has already raised this year’s IPCA forecast to 4.10%.
But the Copom once again cited old concerns, such as the resilience of services inflation and domestic fiscal policyin which government stimuli and doubts regarding the evolution of public finances can interfere with prices, assets and, as a consequence, monetary policy itself.
In any case, the as mentioned in the statement, as the prolonged period of maintaining the basic rate at a contractionary level provided evidence of a slowdown in economic activity.
A decision to reduce the basic rate to 14.75% was assessed as compatible with the inflation convergence strategy around the target in the relevant horizon. Target of 3%, on a horizon that runs until 2028. But it left future steps open, linking the next decisions to greater clarity regarding the depth and extent of conflicts in the Middle East, as well as the direct and indirect effects on the price level over time.
admitted that the possible need for even raising interest rates was discusseddepending on the evolution of the current scenario of uncertainty. In Brazil, the direction of monetary policy will also depend greatly on how much the current scenario may interfere with the inflation trajectory.
*This text does not necessarily reflect the opinion of Jovem Pan.
