Inflation: start of Selic cut is a big question mark – 05/13/2023 – Market

The expectations of investment banks and managers for the beginning of the cut in the basic interest rate, the Selic, bring very different views. Although the release of the IPCA (Extended Consumer Price Index) for April weighed heavily on the analyses, most houses maintained their projections regarding the beginning of the easing of monetary policy.

In a report released this Friday (12), Genial Investimentos said that, despite the continued deceleration of inflation, overall the composition showed a more negative reading. This view reinforces the manager’s position that there is no room this year to cut the Selic, which should remain at 13.75% until the end of 2023.

Inflation measured by the IPCA increased 0.61% in April, a slowdown from the 0.71% registered in March, but above the median of market projections, which was 0.55%. Analysts draw attention to the fact that inflation is still spread across different sectors.

In addition, the most volatile items, such as fuel, which were largely responsible for the reduction in inflation seen last year, are no longer indicating a significant cooling down, according to Genial.

Itaú BBA maintained its projection that the beginning of the easing of monetary policy should occur between October and November, with the Selic reaching 12.5% ​​by the end of the year, an estimate made since the last decision on interest rates by the Copom (Committee of Monetary Policy) of the Central Bank.

“Slightly higher underlying core services and diffusion still at a high level, both indicate that disinflation is taking place, however gradually, as is expected at this stage of the cycle”, informed Itaú.

BTG Pactual also did not change its forecast, which is more open, of starting to cut interest rates from the second half of the year.

XP Investimentos is working with the scenario of the start of the Selic reduction at the August Copom meeting. A Sheetthe chief economist at XP, Caio Megale, said that the release of the IPCA does not usually change the view of his analysis team on the interest rate decision.

The Bank of America, one of the most optimistic in its analyzes on Brazil, informed that the April inflation removes from the table any possibility of cutting the Selic rate in June, something that was expected by the American bank.

“The surprise of high [do IPCA] significantly reduces the potential rate cut starting in June,” says the BoFA.

The Swiss bank Credit Suisse, in turn, estimates that the easing of monetary policy will begin in September, with a Selic cut of 0.25 percentage points, and projects that the basic interest rate will reach 12.5% ​​by the end of 2023 .

Credit observes that, despite the continuity of the disinflationary process in Brazil, the services sector is still the main challenge for maintaining a high level of prices.

“In our view, the main challenges for the disinflationary process continue to be the re-anchoring of inflation expectations, the approval of the new fiscal framework (which should allow for greater predictability of public accounts) and the decision to maintain or change the target regime of inflation in relation to its current format”, explains the Swiss bank in a report.