The speech of the Minister of Finance, Fernando Haddadon the morning of this Thursday, 9th, that he prefers to wait for the release of the Copom minutes next Wednesday to comment on the committee’s decision is an indication that the division in central bank on the interest rate cut was at the pace of cuts, but not at the size of the cycle.
According to government interlocutors with the Central Bank, there was surprise among the directors appointed by President Luiz Inácio Lula da Silva that they were showing a sign of leniency with inflation by having voted for a 0.5 point reduction in the Selic.
Brasília, 01/31/2024 – Meeting of the Monetary Policy Committee of the Central Bank of Brazil. Photo: Raphael Ribeiro/BCB Photograph: Raphael Ribeiro/BC
The argument is that the statement was quite harsh, and represents the vision of the Copom as a whole, not just the winning wing, which voted for the smaller reduction, of 0.25 percentage points – from 10.75% to 10.5% per year. Therefore, the minutes that will be released next week should make this clearer, to the point of calming the financial market.
The understanding of these directors, including Gabriel Galípolo It is Paulo Pichetti, is that the end of the cycle is much more important than the pace of cuts. By this logic, the BC could cut interest rates more quickly, but end the reductions sooner. The wing led by the bank president, Roberto Campos Netounderstand that it is better to go slowly, to have more time for analysis.
One way or another, one thing is certain: the Central Bank failed to communicate at a decisive moment. And mistakes happened on both sides.
Campos Neto broke the “guidance” (future indication) from the previous meeting, which promised a half-point cut. And he did it in the worst possible way, at an event for investors at XP Investimentosin New York, with the market in operation.
The directors appointed by Lula understood that a tough statement from the Central Bank this week would also include their vision, even with the vote to lower the Selic by 0.5 points. That is not what happened. The market’s reading now is that the Central Bank, which will have a Lula majority from next year onwards, will be more lenient with inflation.
The Copom minutes next week will be decisive in calming tempers. But the noise created by the BC – and this applies to both sides – has already taken place, with increased uncertainty.
Tags: Copom minutes disagreement rhythm Selic cut cycle read scenes
