Market sees Selic at 11.75% at the end of the year and lower GDP growth, shows BC

The market began to see greater monetary tightening this year, at the same time that for the third time in a row it reduced the outlook for economic growth, showed the Focus survey released by the Central Bank this Monday (10).

The weekly survey showed that the basic interest rate Selic is now calculated at 11.75% at the end of this year, from 11.50% before. For 2023, the account remains at 8.0%.

At the last meeting of last year, the BC raised the basic interest rate to 9.25%, and will meet again on February 1 and 2.

For GDP (Gross Domestic Product), the approximately 100 economists consulted continued to see growth of 4.50% last year, but reduced the perspective of expansion in 2022 to just 0.28% in the median of projections, against a rate of 0. .36% estimated before. The bill for 2023 also dropped, by 0.1 percentage point, to 1.70%.

Regarding inflation, experts began to calculate that the IPCA closed 2021 at 9.99%, from 10.01% in the previous survey. The reading of inflation for December and the accumulated of last year will be released by the IBGE on Tuesday. (11)

Despite the fifth consecutive drop in the 2021 projection, it remains well above the official target, which is 3.75% with a tolerance margin of 1.5 percentage points or so.

For 2022, the IPCA high expectation remained at 5.03%, but for 2023, it dropped to 3.36%, from 3.41%. For this year, the center of the objective is 3.5% and, for 2023, 3.25%, always with a margin of 1.5 points.

Fed monetary tightening

Emerging economies need to prepare for interest rate hikes in the United States, the International Monetary Fund (IMF) said, warning that faster-than-expected moves by the Federal Reserve could affect financial markets and trigger capital outflows and currency depreciation in the US. outside.

In a blog posted on Monday, the IMF said it expected robust growth in the US to continue, with inflation likely to moderate later in the year. The global lender will release new world economic forecasts on January 25th.

The Fund said a gradual and well-telegraphed tightening of monetary policy in the US should have little impact on emerging markets, with external demand offsetting the impact of rising funding costs.

But US wage inflation or sustained supply bottlenecks could push prices higher than expected and fuel expectations of faster inflation, prompting faster rate hikes by the US central bank.

“Emerging economies should prepare for potential periods of economic turmoil,” the IMF said, citing the risks posed by faster-than-expected rate hikes by the Fed and the resurgence of the pandemic.

St. Louis Fed President James Bullard recently said the Fed could raise rates as early as March, months earlier than previously expected, and that it is now in a “good position” to take even more aggressive steps against inflation. , as necessary.

“Rapider interest rate hikes by the Fed could affect financial markets and tighten financial conditions globally. These developments could come with a slowdown in US demand and trade, and could lead to capital outflows and currency depreciation in emerging markets,” they wrote. IMF officials on the blog.

The IMF said emerging markets with high public and private debt, currency exposures and low current account balances had already started to see broader movements of their currencies against the dollar.

The Fund said emerging markets with stronger inflationary pressures or weaker institutions should act quickly to let currencies depreciate and raise rates.

He urged central banks to clearly and consistently communicate their plans to tighten monetary policy, and said countries with high levels of debt denominated in foreign currencies should seek to hedge their exposures where possible.