Market already sees greater tightening for Selic
The Trend forecast is for the Selic to rise by 0.5 percentage point in August and 0.25 point in September
The market began to review its bets on the evolution of the Selic, with the prospect of higher-than-expected inflation in 2023 and greater risk for the administration of public accounts, after the approval of the PEC “Kamizake” – which increased the value of benefits such as Brazil aid and created others during the election year. The package will cost R$ 41.2 billion, a value outside the spending ceiling.
If before the expectation was that the increase in the basic interest rate, currently at 13.25% per year, could already be interrupted in August, now banks and consulting companies assess that the increases should continue at least until September or October. In this scenario, the Selic could reach up to 14.25%, according to new market estimates, returning to the mid-2016 level.
“If you let inflation run wild at the moment, there is a risk not only of a spread of all prices in the economy, but of a persistence of this high inflation over several years”, says Silvio Campos Neto, partner at Tendências Consultoria.
According to him, the Trends forecast is for the Selic to rise by 0.5 percentage point in August and 0.25 point in September, taking the rate to 14%.
Credit Suisse, on the other hand, estimates an increase of 0.5 percentage point in August and two more hikes of 0.25 point in September and October, to 14.25%. Santander has the same forecast, but with two consecutive increases of 0.5 point in Copom meetings both next month and the following month.
The picture is not unique to Brazil. Lucas Vilela, an economist at Credit Suisse, points out that global banks are working with higher interest rates in the US and the Eurozone, which are trying to deal with record inflation.