Lula's allies press for lower interest rates before Copom and part of the market reevaluates the Selic cut

The Copom meets this week with the Selic at 13.75% per year, and the pressure on the decision gained a new component: allies of the Lula government (PT) raised their tone against high interest rates. According to InfoMoney, the movement takes place before the meeting and targets the financial market and the Central Bank.

The pressure, according to InfoMoney, is joint: the allies sing a chorus against the financial market and the monetary authority in defense of a cut in the basic rate. Estadão describes the same movement as pressure for lower interest rates before the Copom.

Before this year's presidential election, the market's bet was a 0.25 percentage point cut in the Selic. This expectation changed after Lula's victory, according to both vehicles: part of the market started to reevaluate the cut, due to the fiscal uncertainty linked to the new mandate.

The debate, therefore, brings together two readings. On the one hand, political pressure for lower interest rates. On the other, the assessment that the new government's fiscal uncertainty calls for caution before any monetary easing.

What is at stake is the ability of the Copom decision to convince the market that interest rates follow a technical logic, and not just pressure from government allies.

What changes for the investor

For those who invest in the stock market, Nasdaq, interest rates and the dollar, the central point is predictability. If the Copom does not confirm the cut that part of the market is already reassessing, assets sensitive to interest rates may react with more volatility, and the exchange rate tends to follow the reading on fiscal credibility. This article does not provide a buy or sell recommendation and does not project prices: what is observed is that fiscal uncertainty, added to political pressure, increases the weight of each signal that comes from the Central Bank.

Automatically translated from Portuguese.