Government created conditions for BC to indicate interest rate cuts from August, says Tebet – 06/12/2023 – Market

The Minister of Planning and Budget, Simone Tebet, said this Monday (12) that the federal government’s economic team had done its “homework” and created the necessary conditions for an interest rate cut in August by the Central Bank.

“We are providing all the elements and conditions so that the BC and the Copom can start to look with affection… show a tendency for a drop in interest rates from now on, predicting a drop in interest rates in August”, said Tebet in an interview to journalists after a meeting of the Sustainable Economic and Social Development Council, known as Conselhão.

Tebet cited the approval of the fiscal framework in the Chamber of Deputies and the progress of the tax reform process in the House as some of these conditions that, according to her, justify optimism on the part of members of the Council.

The minister cited political and institutional stability and diverse fiscal and economic policies as the main points that differ the current scenario from the scenario when the BC fixed the Selic rate at 13.75% per year, which would justify the downward trend in the rate basic.

“The IBGE showed, in the last quarter, surprisingly, a macroeconomic environment that is not common to happen. We had a growth above the quarterly expectation of 1.9%, which already shows that Brazil can reach, yes, the closing of growth of the GDP (Gross Domestic Product) of 2% or a little more than that at the end of the year, with inflation below the projected”, he said.

Tebet also pointed out that the GDP projections, combined with the deceleration of inflation, are the main elements that can help the Copom to “analyze the possible reduction of interest rates in the next meetings”.

FISCAL FRAMEWORK

Asked about the government’s expectations for the processing of the fiscal framework in the Senate, the minister said that the matter is in line with the House’s concern with fiscal responsibility. She also said that it was a mistake to point out that the amendments to the proposal, made by the Chamber, make room for more spending by the government.

“If the framework is approved the way it is, obviously we will cut spending next year. But it means that the framework does not come with this slackness in public spending, as many have presented. On the contrary, it is more restrictive. We will show this to the Senate,” he said.

According to Tebet, the inclusion of the nursing floor, the Constitutional Fund of the Federal District and the Fund for the Maintenance and Development of Basic Education and the Valorization of Education Professionals (Fundeb) in the framework stifle part of the federal budget.

“I would say that, even with the official numbers, we are between 32 and 40 billion reais less than what we need to close, next year, public expenses in Brazil”, he added.