Central Bank should maintain Selic at 13.75% and pause cuts after Lula’s re-election

According to InfoMoney, a Reuters survey opened on October 28 indicates that the Central Bank should maintain the Selic at 13.75% on Wednesday. If the forecast is confirmed, the decision will interrupt the series of cuts.

Most analysts initially expected a sixth consecutive cut of 25 basis points. The pause breaks this expectation and changes the tone of monetary policy at a time when the market was already adjusting its bets.

The backdrop is Lula's re-election, in October's presidential election. According to the report, the result frustrated expectations of a quick solution to the government's budget problems. Senator Flávio Bolsonaro appears as the rival mentioned in the text.

Domestic markets were shaken last week shortly after the election results. Early the following week, a Treasury intervention calmed the turmoil, according to the same coverage.

The text is signed by Gabriel Burin, from Buenos Aires, and is dated November 2nd. The available data does not indicate a deadline for the resumption of cuts.

What changes for the investor

A Selic maintained at 13.75% means that the basic interest rate remains at the current level, without the relief that part of the market was already considering. For those who follow the stock market, Nasdaq, interest rates and the dollar, this tends to keep the cost of money high for longer. Frustration with the quick budget solution also shifts the focus to the trajectory of public accounts, which becomes one of the main points of attention. With high interest rates, fixed income can become more competitive compared to the stock market, and credit tends to remain expensive. The Treasury's intervention contained volatility, but does not eliminate the risk of new shocks.

Automatically translated from Portuguese.