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Understanding What The Central Bank (BC) Wants For The Selic Rate In The Coming Quarters, Keeping The Basic Rate Of The Economy At Restricted Levels, Is The Expectation Of Finance Minister Fernando Haddad, Since The Goal Is To Zero The Deficit By The Beginning Of 2024.
In divergence, the market, which spends each day hoping that the BC will start cutting the Selic rate, which is at its highest level since 2016, 13.75%. However, last Tuesday (10), the monetary authority sent a message to Haddad. In an Open Letter, the Selic rate will remain high for a longer period. And the market wanted some reduction to happen as early as the first quarter.
The BC explained that the maintenance of rates, in monetary tightening, allowed inflation to end 2022 above the upper limit of the target, at 5.75%. Market specialists still project that the Monetary Policy Committee (Copom) may adjust interest rates, despite the message. However, the agency’s message is clear, “according to the Communication and the Minutes of its most recent meeting, the Committee will remain vigilant, assessing whether the strategy of maintaining the basic interest rate for a sufficiently prolonged period will be able to ensure the convergence of inflation.
The Bank discusses other reasons, in full, “i. Inertia of inflation from the previous year; ii. rise in commodities prices, especially oil; iii. imbalances between supply and demand for inputs and bottlenecks in global production chains; iv. shocks in food prices, resulting from climatic issues; and v. resumption of demand for services and employment, driven by the sharp decline in the number of Covid-19 cases and the consequent increase in mobility.
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Chinese giant worth nearly R$ 4 billion that manufactures cables for electric cars, solar energy, and robotics wants to open a factory in SC.
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Many employers do not know, but the law guarantees domestic workers a 25% increase in salary during trips, 50% for overtime, 20% for night shifts, and 17 additional benefits that can lead to labor lawsuits if not paid.
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Gasoline prices soar and the question arises: is ethanol more advantageous? The 70% rule reveals the limit with gasoline.
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The government has made a decision and is starting a test with more ethanol in gasoline, anticipating a mixture of up to 35%, diesel with 25% biodiesel, and a study to assess the impacts on engines.
The monetary authority also emphasized that the estimates presented in the Open Letter explaining inflation above the upper limit of the tolerance range of the target in 2022 are “approximations constructed based on models and, therefore, are subject to the inherent uncertainties of the modeling and estimation process,” resulting from “climatic anomalies,” the BC stated.
The Letter includes a series of infographics and tables depicting components, inflation itself, decomposition, rate deviation, indices, oil prices, among others, such as energy tariff flags and data from Caged, in the twelve months of 2022, as well as the evolution of inflation expectations from the Focus survey for the period 2023-2025.
Roberto de Oliveira Campos Neto, president of the BC, signed the Letter.
Tough Tone And Distant Horizon
In a speech where the impacts of fiscal risk are not present, investors, even with other demands, know that maintaining the Selic rate at 13.75% for a longer time is the way to ensure convergence. And if there is someone awaiting a review of interest rates, what is envisioned is a residual rise.
Only after September 2023 is there a residual probability of the Selic rate decreasing, that is, in December, it will end the year around 12.25%. It is a stability that projects over a long period.
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