Market acts cautiously on this “super-Wednesday”, awaiting decisions from the Fed and BC

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Super Wednesday is here, and it looks like the markets’ anxiety isn’t going to be abated anytime soon. Expectations for the decisions of the Federal Reserve (Fed, the central bank of the United States) and the Brazilian Central Bank (BC) live in the field of probability, although investors are already working with pessimism on the horizon.

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Starting with Brazil, the most likely, according to market analysts, is that the Monetary Policy Committee (Copom) will stop raising interest rates and end what was the biggest cycle of increase in the Selic Rate since the beginning of the target system, in 1999. If the choice is to really park at 13.75% per year, the BC will have to use communication to keep the market in the desired direction and anchor expectations.

There are two magic words here: surveillance and permanence. The BC should reinforce that it will keep an eye on the trajectory of inflation, while maintaining that the Selic should not start to fall anytime soon.

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If you opt for a small increase — more symbolic than monetary — to take the Selic to 14%, there will be two instruments to reinforce this same message: part will be embedded in this movement, part in the communication that follows the decision.

In the United States, on the other hand, the pace is one of accelerating interest rates. The uncertainty is no longer in what the Fed should do this Wednesday, but when will be the end point of the cycle of monetary tightening, which began long after the Brazilian. According to forecasts, the ceiling should be 4% to 5%, which, even at the lowest end, has already taken the interest rate to the highest level in more than 15 years.

This is what Jerome Powell called the “pain” that Americans will have to feel as the fight against inflation continues in full swing. An interest rate at such levels can lead to low growth, rising unemployment and possibly a recession.

According to a Bloomberg survey, more than 90 countries are raising interest rates in an attempt to deal with the unprecedented inflationary shock in the global economy, of which half have taken the decision to raise interest rates by at least 0.75 pp. this week, 12 central banks are expected to announce monetary policy decisions.

Presented by Thais Herédia and Priscila Yazbek, CNN Money presents a balance of news issues that influence markets, finances and the direction of society and power dynamics in Brazil and worldwide.

*Posted by Tamara Nassif

Source: CNN Brasil

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