2023-11-02 01:35:36
© Reuters. Headquarters of the Central Bank, in Brasília 03/22/2022 REUTERS/Adriano Machado
(Reuters) – The Central Bank’s Monetary Policy Committee (Copom) decided this Wednesday to cut the basic Selic rate by 0.5 percentage points, to 12.25% per year, and stated that it foresees reductions at the same pace in the next meetings.
See comments from experts on the Copom decision below.
JOÃO SAVIGNON, HEAD OF MACROECONOMIC RESEARCH AT KÍNITRO CAPITAL:
“The statement was in line with our expectations and could be received by the market as dovish (soft), as there was a possibility that the BC would signal the maintenance of the cutting pace only at the next meeting.
The only element that could be considered a tougher signal (hawkish) was the concern about the international situation, which in the Copom’s assessment is more adverse. But in our view, as the exchange rate has behaved relatively benignly, this does not have immediate implications for the conduct of domestic monetary policy.”
ANDREA DAMICO, CHIEF ECONOMIST AT ARMOR CAPITAL:
“He uses the word ‘caution’ twice in this statement, always referring to the external scenario. Regarding the fiscal issue, he tried to reinforce it, but in a very subtle way, practically changing a single word. I think (the topic) will weigh heavily yes, even more than the external scenario, in my view, but the Copom, even because it has not made any decision, preferred not to say much about this. I think that perhaps in the minutes there will be something more explicit in relation to how fiscal risk can affect the conduct of monetary policy. But the statement wanted to convey a perhaps harsher tone and ended up doing that, but using the external scenario, which in fact got much worse.”
LAURA MORAES, ECONOMIST, INVESTMENTS:
“Given what happened with the American interest curve and with the fiscal here in Brazil, one of the main points of attention in relation to the statement was the balance of risks, since it sheds light on the committee’s view on the evolution of these two risks. In this sense, the statement did not change the balance of risks, keeping it symmetrical. However, there is an emphasis on uncertainty arising from the international scenario.”
PAULO GALA, CHIEF ECONOMIST OF BANCO MASTER:
“It made no sense to accelerate the pace to 0.75, especially because expectations are unmoored for next year and 2025. Furthermore, there is a new fiscal deterioration on the horizon, with doubts about meeting the fiscal target next year, and a more troubled scenario abroad, with the conflict in the Middle East, with prices going to 5% and doubts regarding American monetary policy. On the other hand, slowing down to 0.25 would not make sense, given that inflation is converging . Inflation this year should be below the target ceiling. So the interest rate does not need to be so much above neutral to guarantee this convergence. The decision was right.”
LEONARDO COSTA, ECONOMIST AT ASA INVESTMENTS:
“Of the three points in the balance of risks that we highlighted as important, two were in line with our expectations. The Copom commented in more detail on the worsening of the external scenario, with the rise of the long curve in the United States and the escalation of the conflict in the East Medium. With weaker data at the margin, the BC now sees the pace of domestic activity as consistent with the expected slowdown. The Copom did not celebrate the current inflation data, which came lower in the cores, especially in services — which can be read as more hawk.”
DANIEL CUNHA, CHIEF STRATEGIST, BGC LIQUIDITY:
“In the statement, the committee toughened its tone when updating the balance of risks that absorbed greater uncertainty arising from the external scenario.
As for domestic developments, the Copom signaled that these (activity + inflation) are unfolding in line with expectations…
“Despite anticipating the next steps of 50bps, there appears to be less visibility/confidence regarding the full length of the cycle.”
(Reuters Editorial)
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