Selic: Campos Neto talks about reduction, without saying when – 06/12/2023 – Market

The president of the Central Bank, Roberto Campos Neto, said this Monday (12) that future interest rates in Brazil have fallen significantly, making room for a cut in the Selic, the basic interest rate, without specifying when the reduction could occur.

“The futures interest curve has had a relevant drop. This means that the market is giving credibility to what is being done, which opens up space for monetary policy action ahead”, stated the president of the BC.

Currently, the Selic rate is 13.75% per annum.

The president of the institution also took the opportunity to pat the Minister of Finance, Fernando Haddad, by saying that the economic team has been working to create a scenario that allows for a drop in interest rates, including with the approval of the framework.

“I think Minister Haddad has made a great effort, sometimes against a big movement by the government itself. We always recognize that, from the beginning, with the reenactment [de combustíveis]. Always remembering that the election year was very bad, it was kind of a championship of promises in which, in the end, it had a fiscal effect.”

Campos Neto participated in an IDV (Institute for the Development of Retail) event, which was attended by leaders from companies such as Magazine Luiza, Zara, Raia Drogasil and Arcos Dourados (McDonald’s franchise).

“We must have a negative inflation number in June and then it will rise slowly, [fechando em] 4.5% inflation in the year.”

The BC president also highlighted that one of the effects of the pandemic was the increase in the number of hours worked and part of the capital invested, but industrial production is at a standstill, which characterizes a loss of productivity.

“In terms of growth, what we see are not very good signs. What we saw is that there is a perception that the neutral real interest rate has risen. On the other hand, one of the questions is the structural growth that the Brazil has, that number has dropped.”

“We raised interest similar to what our peers rose, today the Brazilian real interest compared to the average is lower than the historical average, we need to have a little patience, we have to understand that our task is to do inflation converges.”

Campos Neto also stated that the work to keep inflation under control is being done and that the more optimistic perspectives for the country’s growth help.

“There is a growth scenario being revised upwards, with inflation being revised downwards. I am a vote [no Copom, Comitê de Política Monetária do BC]I can’t say anything, but we have to do things with patience and parsimony, if it’s interrupted in the middle it has a much higher cost.”

After a sharp retreat in the previous session, the rates of interest futures contracts closed this Monday at a new low at the short end, amid the expectation of the beginning of the cycle of Selic cuts, while the long end showed an increase, in the wake of the increase in yields of Treasuries abroad.

Analysts also lowered their expectations for 2023 to 2026 inflation in the Focus survey, following a stronger-than-expected slowdown in consumer price increases in May.

The survey released this Monday by the Central Bank shows that the projections for the increase in the IPCA (the official inflation, measured by the IBGE) are now 5.42% in 2023, 4.04% in 2024, 3.90% in 2025 and 3.88% in 2026.

In the previous week, these accounts were at 5.69%, 4.12%, 4.00% and 4.00% respectively.

For the Selic, analysts continue to see basic interest at 12.5% ​​at the end of this year, at 10% at the end of 2024 and at 9% at the end of 2025. For 2026, the outlook was reduced from 9% to 8, 75%.

“Let’s have a little patience, things are going in the right direction. It’s a slow process, it takes time, everything the BC does today has no immediate effect. The expectation has a strong effect and it’s going in the right direction.”

Market players have reduced premiums embedded in the Brazilian forward curve, in the wake of the latest inflation data and optimism surrounding the progress of the new fiscal framework in Congress.

With Reuters