October 1, 2022

What to Expect on U.S. and Brazil Fed Decision Day by Investing.com

© Reuters.

By Jessica Bahia Melo

Investing.com – Interest in “Super Wednesday” agenda with monetary policy decisions in Brazil and the US. The two central banks began their two-day meetings on Tuesday and announced today whether or not to raise key interest rates in the economy. Additionally, Japan announces its decision on interest rates early Wednesday morning (Brasilia time).

A bearish scenario dominated the start of the week. Opening proceedings, (Riskbank) surprised the market by announcing an increase in its benchmark rate by 1 full percentage point. Other policymakers are expected to release their interest rates later in the week, reporting on Thursday.

The market expects at least a 0.75 pp rise in the US

The announcement of the event takes place at 15:00 (Brasilia time). At 3:30 p.m., focus on the central bank governor’s speeches, , on

The (Fed’s) Federal Open Market Committee (FOMC) is expected to decide on the rate of further hikes in the US, currently in a range of 2.25% to 2.5% after a 75 basis point hike. Unanimous decision at the July meeting. The expectation for 85% of the market is a fresh 0.75 percentage point hike in fed funds rates. However, before the release of new price level data last week, prices were still up by half a percentage point.

In August, the US consumer price index () reached 8.3% over the twelve months, slightly above the forecast of 8.1% but below the previous 8.5%. Last month’s inflation results dashed expectations that the central bank would ease monetary tightening.

A pause in the monetary crisis cycle in Brazil is still uncertain

In the local context, the Monetary Policy Committee (MPC) announces whether or not to raise it after 18:00 (Brasilia time). Here, the market’s expectation is that the current base interest rate will remain at 13.75%, but there is still uncertainty regarding the approach to the report, which indicates a pause in the tightening cycle and its causes, or there may be a residual increase. 25 basis points – an option opened in a report released after the last meeting in August.

The country’s official measure of inflation, the Broad Consumer Price Index () was -0.68% in July and -0.36% in August. Twelve-month inflation eased to single digits at 8.73%. For this year, the target for the IPCA is 3.5%, with a tolerance gap of 1.5 percentage points. Roberto Campos Neto, the head of the Brazilian BC, and Bruno Serra, the director of monetary policy, have recently expressed harsher phrases, from the point of view that the battle for inflation control has not yet been won.

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