Bank of America raised its forecast to the level of the basic interest rate at the end of the current monetary tightening cycle by the Central Bank of Brazil to 12.25%, against a previous estimate of the terminal Selic of 11.25%.
BofA’s review came after the release on Tuesday (8) of the minutes of the last meeting of the Monetary Policy Committee (Copom), which, according to the US private bank, adopted a more “hawkish” tone (tough in the fight against inflation) than that seen in last Wednesday’s announcement (2), when the Selic rate was raised by 1.5 percentage points, to 10.75% per year.
“The Central Bank stated that the deceleration of the pace of interest rate hikes is the most appropriate way to reach the convergence of inflation to the target and re-anchor expectations, but suggested that there will be more adjustments ahead, instead of a final hike in March, as we expected”, explained in a report David Beker, head of economics in Brazil at BofA.
According to the private bank, the Selic rate will rise by 1 percentage point in March, an adjustment that will be followed by a rise of 0.5 point in May. Previously, BofA’s expectation was for a final rise of 0.5 point next month.
In the Copom minutes, the BC chose not to indicate to the markets the magnitude of the interest rate hike at the next collegiate meeting, in March. The municipality, however, stated that the tightening cycle should be more contractionary than that used in the reference scenario over the relevant horizon, which predicted a Selic of 12% in the first half of 2022, from 11.75% in the first half of 2022. end of this year and 8% in 2023.
“This could signal either a higher terminal rate followed by interest rate cuts, or the same terminal level with a postponement of the easing cycle predicted in the baseline scenario,” Beker said.
Source: CNN Brasil

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