Copom should hold the 13.75% of the Selic and long maturities dominate the post-election focus

This Wednesday (4/11), the Copom meeting defines the Selic, and the consensus points to maintaining 13.75%. According to Itaú, the decision must be unanimous, because the base scenario has deteriorated. At the same time, the market's focus begins to shift to longer-term interest rates.

Not all analysts see the picture the same. According to Estadão, there are economists divided: some are betting on a reduction of 0.25 p.p., and some prefer to leave the Selic at 13.75%. The option contracts on the decision at B3, raised on Friday (10/30), priced a 72.5% chance of maintenance and a 26% chance that the rate would fall 0.25 points, according to InfoMoney.

The backdrop weighs against a cut. For Itaú, there are internal inflationary pressures and an adverse external environment, in addition to already unanchored inflation expectations. According to Estadão, the risk reading for prices has become more negative since the September meeting, and there are those who are even talking about rising interest rates. The last Copom meeting had taken place in September.

It is in long maturities that the impact of the election is most clearly shown. According to InfoMoney, this interest has already been charged at a high premium since Lula was re-elected, and managers and economists see a stronger effect on these terms. Therefore, Wednesday's decision gains importance less because of today's rate and more because of what it signals for the coming years.

The extent of this concern became clear in the week following the re-election. According to InfoMoney, the session had the most intense weekly decline since March 2020, with a rise in the dollar and a strong jump in future interest rates. On the same date as the decision, the September Caged also comes out, which adds a reference to the job market on the week's agenda.

What is at stake is less the rate number than the reading on the horizon ahead. With inflation under pressure and expectations already unmoored, according to Itaú, any signal from Copom about the next steps should weigh on the long curve.

What changes for the investor

For those who follow the stock market, Nasdaq, interest rates and the dollar, the scenario calls for attention to the premium charged on long maturities and the sensitivity of the exchange rate to these movements. Maintaining the Selic rate with cautious communication tends to keep the long curve as the main thermometer of inflationary risk, while an unexpected cut could reopen the debate about the size of this premium. This analysis does not predict prices or recommend the purchase or sale of assets: what the facts found indicate is that the volatility of long interest rates and the dollar remains at the center of the market's reading.

Automatically translated from Portuguese.