BC Members Reiterate in Speeches that Doing What is Necessary to Meet the Inflation Target is Not Guidance for a Rate Hike – 08/23
In a week lacking domestic economic data, the speeches from Central Bank directors were the main highlight. Overall, the members chose to maintain their tone and emphasize the content of the minutes, underscoring their discomfort with the unanchoring of expectations, although some remarks were interpreted by the market as having a more dovish tone. For now, we maintain our expectation of holding the current Selic rate at 10.50% until the end of 2025, supported by the understanding that, in this alternative scenario, the Central Bank achieves its goal of bringing inflation to around the target in the relevant horizon (1st quarter of 2026). Although the members emphasize that they will not hesitate to raise interest rates to meet the target, we understand this narrative as a cautious stance and not as guidance, given that, if our expected scenario evolves as anticipated, maintaining the current interest rate level would be sufficient to meet the central objective. In the United States, J. Powell’s speech at Jackson Hole solidified expectations of rate cuts in the FED Funds at the next meeting in September, consistent with our forecast of three 25bps cuts by the end of the year.
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