December 9, 2023

Everything is going to go wrong next week, notes the former British Columbia and Itau-Money Times economist

The central bank has kept the index at 13.75% since August last year. (Photo: Agência Brasil)

next week MPC (cobum) meet to determine the future Silic and press on central bank To ease the tightening of monetary policy is growing every day.

After the collapse of the Silicon Valley bank (SVB) and Signature Bank, the market triggered the opposite of central banks changing direction, as the financial crisis has the potential to slow economies. In doing so, the authorities can put their foot on the brakes or even start a cycle of cuts expenses.

However, Itaú’s chief economist and former director of economic policy at the Central Bank, Mario Mesquitaindicates that the rate cut at the next meeting may be a mistake.

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In a conversation with journalists, he recalled that in 2011 the Central Bank tried to preempt the European crisis and carried out a “horse hobby”. That is, he was in Cilic’s high cycle and announced a downgrade. The result was that inflation rose faster than expected.

“Experience shows that in 2011, when the central bank sought to anticipate a potential shock to defend economic activity, and put the inflation target in the background, it was very wrong,” he said. He added, “I think cutting interest rates now, in the short term, would be very risky and have a good chance of error.”

The economist also noted that the current scenario is very volatile at the moment due to bank failure and that it will be necessary to watch the reaction of the Fed. In Itau’s projections, the Fed should not cut interest rates before 2024 — although it may halt hikes earlier than expected as an anticipation of financial risks.

The central bank here in Brazil should start devaluing the silique this year, but not in the coming months. It is expected that the base interest rate will end in 2023 at the level of 12.5%, and 10% next year. The authority maintains the Celic ratio at 13.75% since August last year.