Central Bank sets interest rate this Wednesday: experts comment

Amid an uncertain and challenging macroeconomic scenario, the decision by the Monetary Policy Committee (Copom), of the Central Bank, to be released this Wednesday (8), has generated great expectations in the financial market. Experts are focusing on discussions about the ideal pace of cutting the Selic rate, whether there will be a 0.25% or 0.50% cut, given an adverse scenario both in Brazil with fiscal uncertainties and floods in Rio Grande do Sul, as well as a complicated scenario also in the USA with the drop in interest rates having been postponed there by the American central bank.

Pedro Marinho Coutinho, capital markets specialist and partner at The Hill Capital, believes that the drop should be 0.50%. “Some market players talk about 0.25% and reinforce this scenario a lot due to the tragedy in Rio Grande do Sul, affecting the fiscal issue, but I believe that we still have 0.50% ahead to continue with the guidance that the Copom had given back at the last meeting“, it says.

Rodrigo Azevedo, economist, financial planner and founder of GT Capital, projects a fall scenario of 0.50% in May and 0.25% in June. “The negative scenario after the last Copom ended up validating the decision to change the forward guidance from the plural to the singular, giving more freedom for the next monetary policy steps from June onwards“, adds the economist.

Despite the drop, Azevedo highlights that fixed income still proves to be an attractive investment. “Even with a new drop in interest rates, we will continue with a double-digit rate, a rate level that is still interesting for fixed income assets“, he explains.

He highlights, in particular, post-fixed securities, which, despite being the most negatively affected by the interest rate cut, still offer interesting profitability due to their liquidity and the possibility of reallocation at strategic moments. “Even in post-fixed securities, those most negatively affected by the interest rate cut, profitability is interesting considering the immediate liquidity and the possibility of using this part of the portfolio for specific opportunities, as has been the case in recent weeks with the allocation to IPCA+ public securities with the opening of the interest curve“, adds Azevedo.

Elcio Cardozo, capital market specialist and partner at Matriz Capital, highlights the market’s greater uncertainty regarding the Selic cut at this meeting, contrasting with the consensus in previous meetings. “After successive cuts of 50bps in the Selic Rate with a certain consensus in the market, this will be a Copom meeting that brings greater doubts to the market as to what the interest rate cut will be at this meeting“, says Cardozo.

This uncertainty is based on US indicators with persistent inflation and the Brazilian fiscal situation with the forecast of higher deficits. “Most of the market is confident in a lower magnitude cut, that is, 25 bps, for this meeting. This expectation of smaller cuts stems from a series of data that were released by the United States and also due to internal factors“, explains Cardozo.

Despite the majority’s expectation of a smaller cut, Cardozo defends the possibility of a 0.50% cut, based on controlled inflation and the high level of the Selic rate. “Particularly, I understand that there is room for a 50bps cut, as occurred in previous Copom meetings. Our inflation is quite controlled, with consecutive data released below consensus and the current level of real interest rates is still very high, with there being a path to biggest interest rate cuts“, argues the expert.

Cardozo highlights that the impacts of different Selic cuts would be reflected in different sectors of the economy. “Sectors such as retail, construction and education tend to appreciate more with a larger-than-expected cut in the Selic. In fixed income, pre-fixed assets linked to the IPCA also appreciate with this drop greater than expected by the market, when we evaluate the mark-to-market of these assets”, explains. In the case of a 25bps cut, already priced in by the market, Cardozo recommends a more conservative stance in investing in shares, prioritizing resilient and dividend-paying companies.

Ana Paula Carvalho, financial planner and partner at AVG Capital, highlights that uncertainties in the external scenario have deteriorated in recent months with issues related to the FED’s interest rate decisions and geopolitics in some oil-producing countries. Here in Brazil, according to her, the strong data on economic activity, in particular, the labor market and the composition of inflation, suggest greater caution in monetary policy, in addition to a very worrying fiscal scenario and the deterioration in inflation expectations.

“Faced with a scenario in which interest rates tend to fall less than expected at the beginning of the year, fixed income investments have still proven to be attractive. For investors with a more daring profile, given a strong opening in future interest curves, good opportunities have emerged in fixed-rate assets and in securities that pay IPCA + interest with longer vertices. For investors with a conservative profile, post-fixed securities with maturities of up to two years continue to be good options with preference for exempt assets”explains.

Rodrigo Cohen, investment analyst and co-founder of Escola de Investimentos, believes that it is time for investors to cash in. “I wouldn’t invest in the stock market now, nor in real estate funds. I just think it’s not the time to enter now because it’s not that attractive with the possibility that interest rates won’t fall as much as expected. I would think about investing in companies abroad like BDRs, for example. Technology companies have delivered great results. In my view, Tesla, Apple, Microsoft, Alphabet itself, Google are great options”, says the analyst.

As for Andre Fernandes, head of variable income and partner at A7 Capital, Brazilian assets still remain discounted, trading at a P/L projected for the next 12 months close to 8x, with the historical average being in the 11-12x range. “I believe there is a lot of upside for shares in the Brazilian market. In addition, there is once again an upward revision in the projection of company profits. The new projection for company profit growth for the next 12 months was above the peak of these projections made in December/2023. So, in my view, for those looking for long-term investment, Ibovespa shares are at attractive prices”, comments.