Central Bank keeps Selic unaltered at 13.75%, does not indicate a cut in August, and asks for ‘patience and serenity
The decision frustrates expectations of a brighter signaling from the Central Bank of a cut in rates already on the next meeting in August
The Central Bank kept the basic interest rate, Selic, at 13.75% for the seventh consecutive time. The communicate, however, frustrated expectations for a brighter signaling from the Copom [Monetary Policy Committee] for a cut in interest rates already in August. Though the Bank’s directors have taken away the text which regards the risk of hikes in Selic, the CB has asked for “patience and serenity on the conduction of monetary policy”.
Andrea Damico, partner, and chief economist at Armor Capital, says that though the CB has not signaled a cut, there was positive evidence like the withdrawal of a text that regarded a likely return of the tightening cycle.
— With this subtle signaling, the Central Bank is preparing the ground for the next move, which is a downward trend. It takes any upward movement off the radar — she said.
Damico also visualizes another subtlety in the statement regarding the verb tense used by the Central Bank when mentioning the strategy of keeping interest rates unchanged for an extended period.
— Previously, the Central Bank used to talk in the future tense, saying that this rate level for an extended period ‘will’ ensure inflation convergence. Now, the Central Bank states that maintaining the interest rate for an extended period ‘has been shown to be appropriate’. In other words, it shifts from the future to the present tense — she analyzes.
