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Copom Market Review Meeting is Already Underway

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The Market Analysis meeting of the Monetary Policy Committee (Copom) began at 10:05 am. On the afternoon of Tuesday Oct 30th, the president of the Central Bank, Ilan Goldfajn, and the directors of the institution still participate in the meeting of Conjuntura Analysis, also within the Copom. On Wednesday, 31, they have another round of discussions before deciding the new level of the Selic (the basic interest rate), currently at 6.5 percent a year.

This is the first Copom meeting after the presidential election, which ended last weekend. With the victory of Jair Bolsonaro, the process of government transition begins now. The composition of the board of the Central Bank in the future government Bolsonaro follows an unknown, as well as the permanence or not of Ilan Goldfajn in the position of president of the autarchy.

Of a total of 61 institutions surveyed by Broadcast Projections, all expect to keep the Selic at 6.5 percent year at this week’s meeting — the lowest level since the rate was created in 1996. If confirmed, this will be the fifth maintenance of the Selic. Hearings economists also expect the Selic to remain at 6.5 percent at the last meeting of the Copom year, scheduled for 11 and 12 December.

By 2019, under the Bolsonaro administration, economists are less certain about the direction of monetary policy. The collected estimates present an important difference, with the Selic rate ranging from 6.5 percent to 10 percent year. The great question is whether the new president will be able to advance in the reform agenda, especially in relation to the Social Security, which could or could not anticipate the process of normalization of the monetary policy.

At the previous meeting, on Sep. 19th, the Copom kept the Selic rate at 6.5 percent year. In the decision, the collegiate followed with the strategy of not giving rigid indications as to the future of the monetary policy. At the same time, he indicated that if the scenario deteriorates, the rate may start to rise gradually. This message was reiterated in the Minutes of the Copom and the Quarterly Inflation Report (RTI), released at the end of September.

Since the Copom meeting in September, the activity indexes that emerged showed a scenario of still gradual recovery for the economy. The most recent — the Central Bank Activity Index (IBC-Br), released on October 17  showed growth of 0.47% in August compared to July. In the quarter ended in August, the indicator rose 1.93%, compared to the quarter ended in May.

Inflation forecasts, for their part, are accommodated, despite uncertainties about the future. In the Focus Market Report, published on Monday, 29, the median of projections for the IPCA in 2018 was 4.43 percent. For 2019, it followed at 4.22 percent. In both cases, the percentages are within the target pursued by the CB.