Copom meeting is one of the most anticipated, says XP – 03/19/2023 – Panel SA

The context in which the Copom (Monetary Policy Committee) meeting will take place this week brings together several ingredients: in addition to the alert for inflation, the uncertainty in the Brazilian credit market and the emergence of international banking turbulence, it also reverberates the recent rhetorical escalation of the President Lula against the high level of interest and the expectation for the fiscal framework.

This seems to be one of the most anticipated meetings in the history of the Central Bank, in the opinion of Caio Megale, chief economist at XP Investimentos. For Megale, the pressure that was seen in Lula’s speeches against interest rates last month seems to have diminished. Attention is now on the fiscal framework, which is another key point for the Central Bank.

“If there is a fiscal framework that credibly signals a trajectory of debt stability, it helps to contain inflationary pressures. But you have to do the math from bottom to top and see if it matches what comes from top to bottom. And it doesn’t It’s easy,” he says.

Megale still does not predict the impact of the topic on this week’s meeting. “It seems difficult to me in 2 or 3 days for this puzzle to come out in a concrete form, in a text that the entire government embraces, and in time for the Central Bank to consider that it is a proposal with a high probability of passing through Congress”, he says. .

The news about the banking crisis abroad is another sensitive issue, but there is still no clear answer as to whether it is an isolated factor or a systemic problem, and the Credit Suisse case has nothing to do with the SVB, he says.

“There are important economists saying that this is not a credit crunch, that inflation is high and interest rates must continue to rise. The ECB (European Central Bank), when in doubt, maintained the strategy. At the moment, raising interest rates when they shouldn’t be could have very bad consequences for the economy. And the opposite too. So, central banks are at a crossroads,” he says.

Megale points out that Brazil also has a credit crisis to call its own. “This is not an international crisis, which depreciates the exchange rate and affects the commodity. This is a crisis that can hit Brazilian economic growth in full. interest rates or to be able to fall sooner”, he says.

Joana Cunha with Paulo Ricardo Martins It is Diego Felix

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