Analysts disagree about Copom’s effects on the interest curve Thursday By Reuters

2024-07-31 23:45:36

By Fabricio de Castro

SÃO PAULO (Reuters) – The effects of the statement by the Monetary Policy Committee of the Central Bank (Copom) on the Brazilian interest curve on Thursday is not a consensus among professionals consulted by Reuters, as the college kept the Selic base rate at 10.50 % against the. year, but reinforced warnings about the current situation.

In the statement, the Copom projected a 12-month inflation of 3.2% in the first quarter of 2026 in the other case, which the stable Selic considers at 10.50%. The percentage is near the middle of the BC’s 3% target, which suggests to some professionals that the institution will not be forced to raise the Selic rate in the near term to meet the target .

At the same time, the Copom warned that “domestic and international circumstances require even greater care when conducting monetary policy”. Specifically, the BC mentioned the inflationary consequences as a result of “market variables” and “inflationary expectations”, which, if more persistent, confirm “the need for greater vigilance”.

“The reference (to market variables) is to the exchange rate and (inflation expectations) and to Focus”, summarized the chief economist at Bmg bank, Flavio Serrano. “The Selic would probably increase more. Therefore, the BC is stricter in relation to the previous communication, but the balance of risks remained symmetrical in my opinion”, he said.

For Serrano, as BC’s statement indicates that an interest rate hike is not imminent — as the pricing market has suggested — the curve should tighten ahead this Thursday.

“There should be an adjustment, with a slight decrease in short interest (future interest), and a slight rise in long interest. This is why, in theory, the BC reduced the probability of an imminent increase in the Selic”, he stressed.

For Mayara Rodrigues, Fixed Income analyst at XP (BVMF:), however, the warnings about the need for “more vigilance” opened the door so that, if there is no improvement, the Copom an Selic to increase even a short horizon, later this year.”

According to her, this usually leads to a flattening movement in the interest rate curve this Thursday.

“Essentially, we expect the probability that the Selic rate will rise to increase more sharply, while the risk of something going wrong has decreased, which is priced at the longer end of the curve”, said Rodrigues, citing a possible approximation of the short-term and long-term rates.

“We’re expecting movements that aren’t sudden, but a little upward movement, in the short term… In the long term, maybe (rates) will fall a little bit because of more control, more of a concern on the committee with the current situation. .”

The assessment of Alexandre Espirito Santo, economist at Way Investimentos and head of Economics and Finance at ESPM, is that the statement adopted a harsh tone, “ordering caution, but not to the point of exaggeration”.

For him, the Selic tends to stay at 10.50% per year in the next two or three Copom meetings and the effects of the statement on the interest curve should be reduced on Thursday.

“The language of the Copom was very quiet, with nothing between the lines, neither dovish nor hawkish. I don’t think there is any big change in the curve”, he said.