By Marcela Ayres
BRASILIA, March 23 (Reuters) - Brazilian markets
responded coldly on Thursday to the central bank's decision to
maintain a hawkish stance and keep interest rates unchanged in
the face of rising inflation expectations.
Holding the benchmark Selic rate at a six-year high of
13.75% on Wednesday for the fifth consecutive time, policymakers
dashed hopes of a more lenient signal for monetary easing amid
global banking turmoil.
Future interest rates opened the session higher, and
expectations embedded in the yield curve that initially
continued to show rate cuts kicking off in June started to point
central bank acting only in August. The U.S. dollar rose 0.75% against the Brazilian real after
beginning the trading session with a decline . The
benchmark Bovespa index dropped 0.6%, falling below
100,000 points for the first time since July 2022.
Sergio Goldenstein, chief strategist at Warren Rena, said
the central bank had dampened chances of a near-term cut. He
noted that policymakers did not mention a potential credible
fiscal framework as a downward risk for inflation, and indicated
they could resume hikes if necessary.
"Furthermore, the various criticisms of government officials
against the central bank generate uneasiness," he added.
Sandro Sobral, trading director at Santander, however, noted
that subdued reaction at the beginning of the session shows that
the market is not heavily positioned one way or the other.
Investors could be expecting policymakers to capitulate to
growing signs of a major economic slowdown ahead.
"It’s curious to see how the traders and the economists
reacted to the decision. The traders are disappointed. The
economists pretty much happy. There’s a big divergence between
the market and academic views now," he wrote.
The bank monetary policymakers emphasized that they would
continue to assess whether maintaining this level for a long
period would be enough to lead consumer prices closer to the
official target.
The message was interpreted as harsh, given expectations
about a sooner start to rate cuts after a more challenging
global environment on the back of U.S. bank closures and the
collapse of Credit Suisse.
Brazilian President Luiz Inacio Lula da Silva said the
central bank must pay the price for the high level of interest
rates, telling reporters that Brazil needs to create jobs.
Finance Minister Fernando Haddad described the central
bank's statement as "very worrying," stating that maintaining
the Selic rate could negatively impact public accounts by
creating difficulties for company sales and for collecting
taxes.
Lula's chief of staff, Rui Costa, called the central bank
"insensitive", while the president of his Workers Party (PT),
Gleisi Hoffmann, said the central bank was "only benefiting
rentiers and those who do not produce."
(Reporting by Marcela Ayres
Editing by Marguerita Choy)
