The BC (Central Bank) reduced the Selic rate by 0.25 percentage points, to 14.25% per year, in a decision announced on Wednesday (17). The measure was in line with the majority market expectations and generated analyzes on the next steps of Brazilian monetary policy.
Fernando Gonçalves, superintendent of economic research at Itaú Unibanco, assessed that the decision was expected, although there was no consensus on the outcome.
Itaú works with Selic, closing the year at 13.75%, which would imply two more cuts of 0.25 percentage points.
“We have a perception that at the next meeting there will certainly be a cut, there is a greater chance of there being a cut, at least”, he stated, noting that the trajectory will be reevaluated as new data emerges.
Tax impact
For Gonçalves, the most relevant point for the real economy is not the difference between a Selic of 13.75% or 14%, but the fact that it lasts for a long period.
“The most important thing is to understand why interest rates are stopping at such a high level,” he said.
He pointed out that the divergence between fiscal policy and monetary policy is at the root of this problem: “This has a lot to do with fiscal policy going in one direction, monetary policy going in another direction.”
“We expected one, there were doubts about it, there were also doubts about whether they would leave it open for future decisions”, he stated.
According to him, the Copom statement presented elements in opposite directions.
The official statement brought, on the one hand, elements considered tougher, such as the acceleration of economic activity, the revision of the inflation projection from 3.5% to 3.7% in the relevant horizon and the addition of upward risks in the balance of risks — including secondary effects of the rise in oil prices and stimulus to demand.
On the other hand, the text indicated that, at the next meeting, with the relevant horizon moving from the fourth quarter of 2027 to the first quarter of 2028, inflation projections would be below the target, which would open space for a new cut.
Gonçalves also highlighted a passage in the statement that raised doubts about a possible change in the committee’s reaction function.
“The committee says that this decision would be compatible with a smoothing of the variation in macroeconomic aggregates,” he said.
According to him, it was not clear whether the BC was giving greater weight to variables such as growth and GDP, in addition to inflation.
“This issue will end up being resolved in the future”, he assessed, highlighting that the Copom minutes, scheduled for the following week, would gain even more relevance given these doubts.
The external scenario was also highlighted as a factor of attention. Gonçalves mentioned that the price of oil fell to the lowest level since the beginning of the conflict between the United States and Iran, which represents inflationary relief coming from abroad.
However, he considered that uncertainty remains high and that small steps, such as the cut made, are consistent with this environment.
“When uncertainty is high, the scenario is very nebulous, the tendency is to take small steps and also not guarantee anything for the future”, he explained.
Another relevant external element was the United States monetary policy decision, released on the same day. With no change in US interest rates, the Federal Reserve statement signaled a tougher stance on inflation, with several members of the committee projecting two interest rate hikes throughout the year.
Gonçalves pointed out that this divergence between interest rates in Brazil and the United States raises questions about the extent to which the Brazilian Central Bank can advance in cuts,
