IstoÉ: 06/15/2022
ANDREA DAMICO, PARTNER AND CHIEF ECONOMIST, ARMOR CAPITAL
“The fact that it (Central Bank) recognizes that there should be a smaller increase than 50 bps – in other words, a 25 bps one– makes it clear its intention to end the current cycle. In addition, the premature mention of 2024 inflation also shows it. It seems like the Central Bank wants to smooth the information that there is no room to stop raising interest rates, considering 2023 forecasts – which do not consider the tax cuts on some products prices. Considering that, next year’s inflation may be 50 or 70 bps higher, closer to the upper boundary of the target limit.”
“Central Bank might raise basic interest rate on Wednesday and may leave the door open to further hikes”
According to the last Focus Bulletin, 2022 IPCA market expectation was 8.89%, very above of 5% inflation target.
BRASÍLIA – The Central Bank will likely raise the Selic rate (basic interest rate) by 50 bps, from 12.75% to 13.25% p.a., in next Monetary Policy Committee (Copom) meeting this week. But it may, once more, not be able to indicate the end of the tightening cycle. Since the last Copom meeting, global inflation started increasing again, and the fiscal risks were intensified due to the new government bill for fuels, without a consistent sign of Brazilian inflation outlook improvement.
