XP: BC will be more aggressive in cutting interest rates – 05/31/2023 – Market

The deceleration of inflation and a weak performance of the economy should lead the BC (Central Bank) to be more aggressive in the interest rate cut cycle than projected today by the market.

The assessment is by José Berenguer, CEO of Banco XP. According to him, although recent economic data indicate an expansion of activity, “it’s not what we feel at the end talking to customers.”

Berenguer stated that, by sector, agribusiness represents a positive highlight, but industry and commerce are in a much less heated situation at the moment.

“The economy will suffer and we are seeing less inflationary pressure, which leads me to believe that the BC will be even more aggressive than we are seeing in terms of the interest curve”, said the executive this Wednesday (31) during an event promoted by XP.

In the futures interest market, which indicates investor projections for the Selic level ahead, the contract for January 2024 was traded this Wednesday at 13.18%, while the title for 2025 was at 11.41%.

Berenguer also stated that, given the high level at which the basic interest rate is found, at 13.75% per year, there are assets traded in the market, such as real estate funds and those dedicated to agribusiness, which are at significant discounts.

“There’s a lot of cheap stuff. The investor will win when he buys in the low, not when he buys in the high”, said the CEO of Banco XP and former president of JP Morgan in Brazil.

He also added that the issuance of incentivized papers, which offer exemption from IR (Income Tax) to individual investors, and which attracted strong demand from investors over the last few months, should lose traction, with a potential direction of interest towards riskier assets.

“We monitor the volume that banks are able to issue [de títulos incentivados]and we have a very concrete impression that this capacity is at its limit”, said Berenguer.

“There must be less competition from this asset class, which ended up greatly affecting funding [da indústria de fundos]with an important shift in savings to this type of paper, especially from high-income customers,” he added.