Market sees ‘contamination’ of Copom by political pressure after disclosure of meeting minutes

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Roberto Campos Neto and Lula: for specialists, better communication could calm things down Reuters/Arte g1 about opening the door for the beginning of the interest rate decline in August. The sign, demanded by government supporters, did not appear in the communiqué released last week, as soon as the decision to maintain the interest rate at 13.75% came out. The document released this Tuesday mentions that, at the Copom meeting, the view that the monetary tightening could begin to be loosened as of August was “predominant”. The Copom is a collegiate body, made up of the president and directors of the Central Bank, responsible for setting the economy’s basic interest rates According to economists and financial market agents interviewed by the blog, the Central Bank “hid” the divergence, which needed to be made clear in last week to technically demonstrate the possible consequences of the meeting. The divergence indicates, according to the sources, a clear path towards the beginning of the Selic reduction cycle, not least because two new members appointed by President Lula should be added to the BC’s board – both tend to vote for a start of the reduction in the rate of interest. fees. For sources who know how the Copom works, there is a contamination of the collegiate by political pressures, coming from the government and sectors of the economy, such as businessmen. President Lula’s pressure has fallen directly on Roberto Campos Neto, president of the Central Bank. The divergence between the directors is explicit in the section where it is debated whether it is premature at this moment to reduce the monetary tightening. “In this debate, there was a divergence in the Committee regarding the degree of signaling in relation to the next steps. The predominant assessment was that the continuation of the ongoing disinflationary process, with consequent impact on expectations, may allow accumulating the necessary confidence to start a parsimonious process of inflection at the next meeting”, says part of the minutes released this Tuesday. “Another group was more cautious, emphasizing that the disinflationary dynamics still reflects the retreat of more volatile components and that the uncertainty about the output gap raises doubts about the impact of the monetary tightening until then implemented”, completes the document.

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