Firm in the present, soft in the future? Decision on Selic shakes Stock Exchange, interest and exchange rates

This Wednesday’s session (9) was marked by a strong aversion to domestic risk, with a 1% drop in the Ibovespa, a sharp rise in future interest rates and the dollar.

What caught investors’ attention most is the repercussion of the decision by the Monetary Policy Committee (Copom). The Committee slowed down the rate of reduction in interest rates by 0.25pp, to 10.50% per year, but with a fierce meeting score (5×4) that brought many indications of what the collegiate will be like from 2025 onwards. In the market’s perception, the meeting indicated more leniency with inflation ahead on the part of the board appointed by the current administration of Luiz Inácio Lula da Silva, even though the tone of the last meeting was “hawkish”, that is, showing concern about the prices.

Meanwhile, in the short term, the decision of those “not appointed” by Lula to reduce the rate of interest cuts could renew the president’s criticism of the current command of the BC, leading to more instability.

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Speaking of government, the Minister of Finance, Fernando Haddad, stated this Thursday that he prefers to wait for the minutes of the meeting, which will be published next Tuesday, to comment on the Copom’s decision. “I will wait for the minutes, I think the minutes can clarify what happened better. The statement is very synthetic,” he said this Thursday post-Copom. Haddad spoke about Copom’s guidance for upcoming meetings, something that he did not include in this statement, for the first time since August last year. “I think the guidance was a very important thing to observe,” he highlighted. Analysts also highlighted that the elimination of the so-called “forward guidance” adds another element of uncertainty to decisions.

With all these elements, the Ibovespa closed down 1%, at 128,188 points, after reaching a low of 127,375 points on the day. The commercial dollar closed with an increase of 1.01%, at R$5.142 in purchase and sale, future interest rates jumped along the curve.

At the end of the afternoon, the DI (Interbank Deposit) rate for January 2025 was at 10.265%, compared to 10.221% of the previous adjustment, while the DI rate for January 2026 was at 10.49%, compared to 10.473% of the previous adjustment . The rate for January 2027 was 10.88%, compared to 10.809%, while the rate for January 2028 was 11.205%, compared to 11.094%. The contract for January 2031 marked 11.68%, compared to 11.511%.

The movement occurs since, if the next composition of the BC cuts interest rates even with resilient inflation, price expectations may increase, which may trigger a strong interest rate rise later on to deal with prices.

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With this scenario of rising future interest rates, the big drops in the Ibovespa are for stocks in the retail and consumer sector (which includes educational and construction companies), as highlighted in the table below. Some companies, such as Cogna (COGN3) and MRV (MRVE3) also reacted to the results or disclosure projections. However, some companies that are also sensitive to interest rates recovered throughout the day, such as Magazine Luiza (MGLU3) and LWSA (LWSA3; ex-Locaweb), which release their results this Thursday (9).

Check out the biggest drops in the Ibovespa in the session below:

Among the few gains are commodity/export shares, which benefit from the higher dollar, such as Vale (VALE3).

Understand the Copom division

According to the Copom statement, the decision to cut interest rates by 0.25 points was supported by president Roberto Campos Neto and directors Carolina Barros, Diogo Guillen, Otávio Damaso and Renato Gomes. Nominated by Lula, Ailton de Aquino, Gabriel Galípolo, Paulo Picchetti and Rodrigo Teixeira voted for a larger reduction, of 0.50 percentage points.

Despite the divergence, the statement reported that the Committee, unanimously, “assesses that the uncertain global scenario and the domestic scenario marked by resilience in activity and unanchored expectations demand greater caution”.

The separation between the more flexible position of the BC board members appointed by Lula and the tougher vision of the components appointed or reappointed during the government of former president Jair Bolsonaro may increase uncertainty about the next steps of monetary policy, as new nominations lead the government to have the majority of nominees on the BC board.

Currently, the authority’s leadership is made up of four directors appointed by Lula, while five have been in post since Bolsonaro’s administration. The next mandates to expire, in December this year, are those of Campos Neto, Carolina Barros and Otávio Damaso.

(with Reuters)