See the expectations for the Selic of large banks after Copom

The main global private creditors already anticipate an imminent end to the Central Bank’s monetary tightening cycle, after the central bank indicated on Wednesday a reduction in the pace of monetary tightening starting at their next meeting in March.

At the end of its monetary policy meeting the day before, the Copom (Monetary Policy Committee) raised interest rates by 1.50 percentage points for the third consecutive time, to 10.75% per year, a decision in line with expectations in a survey by the Reuters.

In a report released on Wednesday night (3), Credit Suisse stated that both the 1.50 point increase in the Selic rate and the indication of a smaller tightening in March were in line with its forecasts.

“We maintain our expectation that the Selic interest rate will be raised by 100 basis points in March and 50 basis points in May”, reaching 12.25% per year, Solange Srour, chief economist at Credit Suisse, said in the document. in Brazil and columnist for leafand Lucas Vilela, economist.

Citi shares this view, stating in a report the day before that it maintains the projection that the basic interest rate will reach 12.25% at the end of the current tightening cycle, after rising 1 percentage point in March and 0.50 point in May.

The US lender said, however, that he sees growing risks of higher-than-currently expected terminal interest rates, saying that the BC’s higher inflation forecasts and signs of a more timid tightening in March could further de-anchor inflation expectations.

According to Wednesday’s statement, the Central Bank began to see a 5.4% rise in the IPCA in 2022, above the 4.7% calculated at the last Copom meeting and also above the ceiling of the tolerance band defined by the CMN ( National Monetary Council), which has a center at 3.50% and extremes at 2.00% and 5.00%.

For 2023, the BC inflation projection is at 3.2%, the same level estimated by the December Copom and below the 3.25% target set for the year.

For BNP Paribas, interest rates are already close to the levels necessary to lead to a convergence of inflation and its expectations back to the Central Bank’s objectives, but there is a need to keep the Selic high for longer.

Like Credit Suisse and Citi, BNP expects the benchmark interest rate to rise by 1 percentage point in March and 0.50 point in May, to 12.25%, slightly revising previous expectations of a final level of 12%. The French bank does not project cuts in the Selic until 2023.

In turn, Alberto Ramos, director of economic research for Latin America at Goldman Sachs, said in a report that he expects an increase of 1 point at the next Copom meeting. This, “depending on the evolution of inflation and the respective risk balances, can proclaim the end of the cycle of high interest rates”, according to the expert.

He stated that the deceleration in the pace of the Selic hike telegraphed by the BC is justified by “a below-trend real GDP growth profile, an uncertain Covid backdrop, lagged effects of the recent monetary tightening and a better anchored exchange rate.” “.

Bank of America does not see the BC promoting two more rate hikes. David Beker, head of economics in Brazil at BofA, said in a report released late on Wednesday that the BC statement “reinforces our view that the monetary tightening cycle is approaching its end.”

According to Beker, the Selic rate should be raised by another 0.50 percentage point in March, ending the era of monetary tightening by the BC with interest at 11.25% per year.