• Twitter
  • Facebook
  • LinkedIn
  • English English English en
  • Português Português Portuguese (Brazil) pt-br
Murray Advogados
  • Home
  • The Firm
  • Areas
    • More…
      • Probate and Family Law
      • Capital Stock
      • Internet & Electronic Trade
      • Life Sciences
      • Capital and Financial Market Banking Law
      • Media e Entertainment
      • Mining
      • Intellectual Property
      • Telecommunications Law and Policy
      • Visas
    • Arbitration
    • Adminstrative Law
    • Environmental Law
    • Civil Law
    • Trade Law
    • Consumer Law
    • Sports Law
    • Market and Antitrust Law
    • Real Estate Law
    • International Law and Foreign Trade
    • Corporate Law
    • Labor Law
    • Tax Law
    • Power, Oil and Gas
  • Members
  • News
  • Links
  • Contact
    • Contact Us
    • Careers
  • Search
  • Menu Menu
Murray News

Analysis: Survey suggests neutral interest rate hike above 4%

US Federal Reserve with the third interest rate hike this year

The Focus bulletin of financial market expectations, released on Monday, indicates that neutral interest rate estimates are on the rise, above 4% a year. This trend, if confirmed, means that the Central Bank will have to define a higher Selic, Brazil’s benchmark interest rate, in the coming years to keep inflation in check.

The market increased, for the second week in a row, its estimate for the nominal interest rate in 2024, to 7.38% a year from 7.25% a year. This means a real interest rate of about 4.38%, considering the 3% inflation target set by the government for the long term.

This percentage exceeds the estimate of a neutral interest rate of 4% a year given by the market in a survey answered by private-sector analysts in December, on the eve of the meetings of the Central Bank’s Monetary Policy Committee (Copom).

The Central Bank itself estimates a neutral interest rate of 3.5% a year, as disclosed in the Inflation Report last month. But the monetary authority assigns a relatively high probability that the percentage will be higher than that, since it considers that fiscal fragility increases the risk of a higher neutral rate.

The year 2024 is far enough away to leave the most immediate horizon of monetary policy, so the interest rate estimated by the market for the period is a kind of approximation of the economy’s neutral rate.

Today, the Central Bank’s attention is focused on meeting the inflation target mainly for 2023 and, to a lesser extent, 2022. The real interest rate that will be in effect in 2024 will be focused on guaranteeing the fulfillment of the inflation target in 2025.

The increase in the projection for the interest rate in 2024 may reflect, besides an eventual increase in the neutral interest rate, a market view that the fight against inflation may be longer than expected, amid a greater resistance in the rise of global prices.

A sign of these difficulties is that the inflation projection for 2024 also rose for the second week in a row, to 3.09% from 3.04%. The rise, however, is smaller than the advance in nominal interest rates in the period, which reinforces the view that the rise in neutral interest rates may be behind the revision of the outlook for the Selic in the period.

The median projection for the Selic rate for the following years remains at 7% per year. But there are previous signs that it may be on an upward trajectory. The average of the projections for 2025 rose to 7.17% from 7.1%. In the case of projections for 2026, it rose to 7.07% from 6.9%.

It is difficult to determine exactly what is causing the higher estimates for the neutral interest rate. Judging by the December survey, two factors may be playing a role: the increase in fiscal risk and the more challenging international scenario.

This year, the government has once again considered new measures that weaken the fiscal situation, such as tax cuts for fuels and for the industrial sector, in a period in which the government still faces a fiscal deficit. The prospect of interest rates being raised by developed countries also creates uncertainty about the level of interest rates that will prevail worldwide in the long term.

Source: Valor International

https://valorinternational.globo.com

22 de February de 2022/by Gelcy Bueno
Tags: interest rate
Share this entry
  • Share on Facebook
  • Share on Twitter
  • Share on WhatsApp
  • Share on LinkedIn
  • Share by Mail

Pesquisa

Posts Recentes

  • Indigenous land case face uncertain fate
  • Public debt rises again under effect of higher interest rates
  • Apollo seeks Brazilian partner to bid for Braskem
  • Bankruptcy cases take 16 years, pay little to creditors
  • Marfrig, Saudi fund to inject R$4.5bn into BRF

Arquivos

  • June 2023
  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
© Copyright 2023 Murray Advogados – PLG International Lawyers - Support Webgui Design
  • Twitter
  • Facebook
  • LinkedIn
Hydrogen is Thyssen’s new bet for South America Brazil to invest BRL 280 million in science and technology institutes
Scroll to top