The Bank of Brazil announced financial problems
2022.12.02 09:08
The Bank of Brazil announced financial problems
Budrigannews.com – Brazil’s central bank will keep benchmark interest rates at a cyclical level of 13.75% next week in response to growing concerns about the new government’s plans to increase social spending.
Kopom, the bank’s rate-setting committee, retained Yastrebin’s position, which in 2023 could provoke a tougher policy than expected and could worsen tensions with the new authorities. “Fearing to resume expansion in the face of a call for additional administrative costs, the Bank expects that on Wednesday the Selic rate will remain at 13.75, according to most estimates of the survey conducted in November 28-December 1.” 31 out of 32 respondents said that they expect the Selic to remain the same during this month.
At the last policy meeting in 2022, only one advocated a modest increase of 25 basis points to 14.0. Copom became the first major central banking organization to begin aggressive tightening after the coronavirus pandemic began. At the beginning of 2021, he increased the Selik rate by 1,175 basis points, but in August he said that this would most likely be done.
Daniel Kassel, an economist at ABB Bank, said that “Inflation and financial risks now assume the attention of the central bank…”Copom will continue to keep the Selik rate at 13.75 for the long term, and the easing cycle will begin from June 2023.” One of the directors of the Central Bank said last week that the market is more receptive to budget news, because it can change expectations and change the currency of Brazil and directly affect the inflation on spending.
His remark was made at the time of the transitional government team of elected presidents Luiz Inacio Lula da Silva, who in 2023 agreed to a multibillion-dollar waiver of the constitutional limit on social support spending. Central Bank governor Roberto Compos Neto echoed concerns about Lula’s planned spending program last month, saying it was not properly explained and caused by uncertainty.
Due to the sharp decline to 6.5 in the annual calculation of October and more than January 12, 2022, Copom officials fear that this, along with other reasons, may lead to an increase in inflation again. If the margin of error is minus-minus 0.5 percent, then the official inflation rate for the coming year is 3.25%.
At the same price, the goal is 3.5% in 2022. As a result of a survey conducted by the Central Bank, economists believe that prices for consumer products will increase by 5.91 percent this year. Expectations of a future rate cut according to a Reuters poll are already below October, which indicates that monetary policy will become less in the future.
The Selic indicator was expected to decrease from 12.25 in the last quarter and to 13.0 in the third quarter of this year. In the coming months of 2023, the indicator was 11.50 against 11.0 in the October study.
