Although the effects and reach of the banking crisis in U.S are still unknown, financial market analysts claim that, with the information available so far, the Brazilian central bank will not have space so soon to start reducing the Selic.
On Monday, after the bankruptcy of the banks SVB Financial Group and Signature Bank, the North American market began to price greater chances of the Federal Reserve (the US central bank) raise its interest rates next week by just 0.25 percentage points – and no more by 0.50 points, as had been expected.
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In reaction, interest rate futures contracts in the Brazil also retreated, amid the view that, with interest rates not so high in the US, the BC could also anticipate the start of the Selic cut, currently at 13.75% per annum.
Analysts heard by Reutershowever, ruled out the possibility that the North American crisis would cause a Selic cut next week or shortly thereafter – cut expectations remain concentrated in the last months of the year.
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“Of course, when you have problems with banks, even with these two that were closed, which are not so expressive in size, we have to wait, be careful. There is always a risk of losing greater confidence in financial institutions that were not facing immediate problems”, ponders economist Mauro Schneider, from MCM Consultores.
Despite the hazy scenario, Schneider says that, with current information, it is not to be expected that the crisis will spread.
“This Tuesday was already a day of more calm and some recovery of assets. If in the US there is only a temporary interruption of the monetary adjustment, the effect of this here in Brazil will also be small, ”he added.
MCM Consultores works with the expectation that the Selic will begin to decrease only in the third quarter of this year. This is also the perspective of Flávio Serrano, economist and partner at BlueLine Asset Management, who rules out cutting the Selic as early as next week.
“There would have to be a deterioration of markets very strong to cut Selic. Cut now, next week, no way,” she states.
According to the most recent Focus report by the Central Bank, with projections collected up to last Friday, the day on which the SVB was closed, the median market expectation is that the Selic rate will start to be cut only in early November, to 13 .25% per annum.
In a report, XP made weightings. “If the Federal Reserve adopts a more flexible stance, we could see the Copom discussing interest rate cuts as well,” the analysts wrote.
Even so, the most general view is that it is still too early to implement a change in the trajectory of the BC’s Monetary Policy Committee (Copom).
“With the information that we have available until today, there is no argument for our BC to cut interest rates,” Roberto Padovani, chief economist at the BV bank, told Reuters. “There is concern about bank risk in the US, but it is not known how this will affect global security, so it is not yet possible for the BC to anticipate a court decision.” He argued that the high prices of raw materials, doubts about what the Lula government’s fiscal expansion will be, a still heated job market in Brazil, inflation that continues at levels above the target and uncertainties in relation to the official inflation targets, among other factors, continue to justify maintaining interest rates, even with external risks. For Matheus Pizzani, economist at CM Capital, “the Central Bank has been signaling in its communications a slightly greater weight of inertial inflation and the fiscal issue” in its monetary policy decisions. “I don’t believe that (the SVB issue and the Fed’s reaction) is enough for the Copom to anticipate interest rate cuts. The BC would need other elements.”
Analysts also claim that, based on the information available, the impact of the US banking crisis in Brazil will be limited. “You banks Brazilians are not directly exposed to the consequences of BVS.
The amounts of unrealized losses in the local books are not material, and the capital and liquidity ratios are comfortable”, said the Itaú BBA in report.
In addition to the Central Bank’s response, market agents are also keeping an eye on how recent developments in the US financial sector will be used in the government’s rhetoric against the monetary authority.
For Pizzani, from CM, the SVB episode should not be used as new ammunition by the government in its recent pressure for a fall in the Selic, arguing that the Minister of Finance, Fernando Haddad, said the day before that there was less turbulence than the expected. “We are talking about the head of the economy, so I don’t think this event will increase this pressure” due to a drop in the Selic rate. Padovani, from BV, stated that the criticism of BC is independent of the scenario and will continue. For him, “these local credit risk factors – it is not known how intense this credit slowdown will be, regardless of one name or another– and international are factors that add up” to the government’s pressure for lower interest rates. Since taking office in January, Lula has repeatedly criticized the interest rate level in the country, currently at 13.75%, and the inflation targeting system, which generated major turmoil in the financial market last month.
The petista has warned of an imminent credit crisis in the face of a scenario that he says is harmful to economic growth.