Analysts highlight CB’s reading of “caution and parsimony”, but keep projection on cuts
Opinion is that the Central Bank didn’t want to commit itself to a date at the beginning of the flexibilization and adopted a harsher-than-expected tone in the communication
The Monetary Policy Committee (Copom) of the Central Bank followed the expected path by virtually everyone in the financial market and kept the basic interest rate (Selic) unchanged at 13.75% per year on this Wednesday (21), toning down the statement compared to previous meetings. However, in the opinion of analysts, even though they are opening the doors for a start of interest rate cuts, the monetary authority took care to describe a still challenging scenario that requires “caution and parsimony.”
Andrea Damico, partner, and chief economist of Armor Capital, still sees a door “slightly open, but not wide open” for interest rate cuts in the short term, even though today’s statement came in a tougher tone than expected. “The Central Bank prioritized the ‘data-dependent’ nature and will observe the next 45 days,” she said.
However, she noted that the predictions of a scenario of benign evolution for inflation, with further downward revisions in the forecasts from the Focus Report, especially if the National Monetary Council decides to maintain the inflation target at 3% for 2024 in the meeting next week, should ensure an interest rate cut as early as August.
