What are the market expectations with the increase in interest rates?

This week, the Monetary Policy Committee of the meets for the last time under the presidency of Roberto Campos Neto to decide on the country’s interest rate. This meeting takes place at a time of turbulence in the financial market, marked by new projections of rising inflation and a surge in the dollar. According to a survey carried out by BTG Pactual, 78% of investors and operators expect an increase of 0.75 percentage points in the Selic rate on Tuesday (10). The survey also revealed that 77% of respondents revised their forecasts following the announcement of the government’s spending package.

Despite market expectations, economist Igor Sabino suggests that the most likely trend is an increase of half a percentage point, which would raise the Selic rate to 11.75% per year. This adjustment is considered necessary to contain inflation, with the Central Bank adopting a more contractionary stance. The forecast is that the rate will reach 12% in January. Furthermore, the rise in the dollar, which recently surpassed the R$6 mark, is another factor that should put pressure on inflation in the coming months. Economist André Perfeito estimates that the Central Bank will continue to increase the Selic, even under the future management of Gabriel Galípolo from 2025 onwards, possibly accelerating the rate of increase to 100 basis points.

The devaluation of the real is likely to persist if the United States economy continues to grow faster than other advanced economies, attracting resources and strengthening the . “When the dollar strengthens, the currencies of emerging countries weaken,” declared economist Pedro Paulo Silveira. Furthermore, André Perfeito warns that maintaining high interest rates for a prolonged period can have adverse effects on the economy. “Depending on the dosage of the medicine, it can create worse dynamism regarding even the perception of the market itself. In 2024, both families and companies are highly indebted. So, the process of raising interest rates could further compromise activity”, stated André.

For the majority of those interviewed by BTG, the increase in interest rates will be decided unanimously. “The market is divided, with the future DI indicating an increase of 0.75 percentage points in the Selic rate. The Selic rate, which is currently 11.25%, would reach 12.00%”, expressed Alan Ghani. The main factors driving this expectation of increase are fiscal deterioration, inflationary expectations and the appreciation of the dollar.

*With information from Misael Mainetti

*Report produced with the help of AI