The central bank (CB) will remain in “wait and see” mode until uncertainty both in Brazil and abroad dissipates, says XP economist Tatiana Nogueira, XP economist, after reading a communiqué in which monetary policy (Copom) confirms maintaining the interest rate at the level of 13.75% per annum.

XP kept its maintenance forecast at 13.75% through June. After that, Selic is expected to fall to 10% by the end of next year. However, everything will depend on the new fiscal anchor, Nogueira emphasizes.

The Economist recalls that both former president Luiz Inacio Lula da Silva (PT) and current chief executive Jair Bolsonaro (PL), opponents in the second round of the presidential election, have already announced that they will change the spending cap rule. “With Brazilian debt and debt service remaining high, we believe a new (robust) fiscal anchor is an important condition for bringing inflation expectations closer to the target path,” an XP economist wrote today in a commentary on the Copom decision.

The reading is that the text largely supports the signaling of the September meeting. That is, that the committee must maintain the exchange rate at the current level for a long period in order to ensure that inflation approaches the target.

Nogueira also notes that Copom’s inflation forecasts have slightly increased for both 2023 (from 4.6% to 4.8%) and 2024 (from 2.8% to 2.9%). “This minor move reinforces the need for the committee to remain vigilant in the coming months,” the economist said.