Copom meets this Wednesday; market predicts the maintenance of the interest rate at 2% per annum | economy

The rise in food prices in September caused official inflation, measured by the Comprehensive National Consumer Price Index (IPCA), to skyrocket.

Last month, inflation was 0.64%, the highest level of the month since 2003. At the beginning of October, the IPCA advanced to 0.94%, the highest rate of the period in 25 years.

Copom sets the base interest rate based on the inflation targeting system. For 2021, the year in which the Central Bank began to make decisions, the central inflation target is 3.75% and it will be officially met if the index fluctuates from 2.25% to 5.25%.

Decisions about interest take six to nine months to have a full impact on the economy.

However, although inflation has been rising in recent months, the most recent forecast from banking economists is that it will add to 2.99% this year and 3.10% in 2021. As a result, inflation is forecast to fall below the central objective of 4% for 2020 and in line with the objectives set for next year.

The inflation target is set by the National Monetary Council (CMN). To achieve this, the Central Bank raises or lowers the basic interest rate of the economy (Selic).

“The opinion remains that the stability of the basic interest rate is justified by expectations [de inflação] anchored [às metas] and inflation projections below the target in the relevant horizon of monetary policy [próximos 18 meses]”, Itaú evaluated, in a statement signed by its chief economist, Mario Mesquita.

The institution estimates, in a baseline scenario, the low interest rate “for a long time.”

In the opinion of banking economists, rising inflation and a lack of clarity on the control of public spending should lead to an increase in interest rates in 2021.

According to a survey conducted by the BC last week, the financial market expects the Selic rate to remain at the current level of 2% per annum until September 2021.

However, as of October next year, economists estimate the start of the upward process. According to estimates, the rate would advance to 2.5% annually in October 2021, 2.75% in December, 3% annually in January 2022, and 3.25% annually in March of that year.

By the end of 2022 and 2023, respectively, still according to a survey conducted by the BC, the market forecast is that the Selic rate will rise to 4.5% per year and 6% per year.

According to the chief economist of Nova Futura Investimentos, Pedro Paulo Silveira, the Central Bank should indicate, in the statement of the Copom meeting, any change or different decision for a second moment.