Campos Neto declares that the pace of cuts in the Selic may decrease

The president of the Central Bank (BC), Roberto Campos Neto, made it clear that the pace of cuts in the Selic (economy's basic interest rate) could be reduced in the next meetings of the Monetary Policy Committee (Copom), due to the uncertainty of the indicators economic conditions and the influence of rising interest rates in the United States. The reduction in the pace of cuts is already valid for the next meeting of the body, which is scheduled for May 8th.

Campos Neto said that his statement is not a guide but rather a transparency of how the body observes the evolution of the economic scenario to work with monetary policy decisions in the coming months. The prediction of a Selic cut of just 0.25% was repeated by him. Currently the rate is 10.75% per year.

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_{Campos Neto during a press conference in Brasília (Photo: reproduction/Getty Images Embed/Ton Molina/Bloomberg)}

During an event organized by Bank of America (BofA), Campos Neto highlighted that the measure to reduce the pace of cuts is linked to the behavior of the economic scenario: “we can have a reduction in uncertainty, and thus continue on the normal path. We can have a scenario in which uncertainty remains high, and then we can talk about reducing the pace”said the president.

The influence of the dollar on the Selic adjustment

The rise in the dollar is a factor that directly affects inflation, as a portion of the economy still responds to these changes in the currency. To the commodities Agriculture and part of the industry, especially high technology, are examples of sectors that respond directly to the rise in the currency.

In a short period, the dollar went from R$5.10 to around R$5.25, this change reflected the prospect of higher interest rates in the United States and a reduction in the credibility of fiscal adjustment in Brazil. All these risks are analyzed by the Central Bank before calculating the economy's basic interest rate and whether or not it is possible to make cuts to reduce it.

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_{Campos Neto in a speech at the National Congress (Photo: reproduction/Getty Images Embed/Andressa Anholete/Bloomberg)}

The slowdown in cuts could be greater

Campos Neto also stated that there could be a scenario in which uncertainties could significantly affect the variables analyzed. As a result, the slowdown in cuts could be more rigid than initially proposed. Although the latest survey on the country's inflation presented positive data, it highlights that decisions to reduce the rate are not made based on just one variable.

The president of the Central Bank also highlighted that if Brazil loses its “fiscal anchor”, the Copom’s work will become more difficult in relation to the previously established fiscal target: “if the situation turns sour and it is necessary to stop reducing interest rates, this will be done”, said Campos Neto.

Featured photo: President of the Central Bank, Roberto Campos Neto (reproduction/Financial Intelligence/ Raphael Ribeiro/BCB)