BTG expects 1.5pct hike in Selic, says failure to cut rates could erode BC's credibility

BTG sees new round of 1.5 percentage point increase in CILEK (Image: Reuters/Adriano Machado)

Just like Asa's origins and XP Investmentsthe BTG Pactual And raised its expectations to SilicIn light of recent communications from Central BankThe bank sees it as “very likely” that a rate hike cycle will take place from the September meeting.

According to analysts, the combination of strong economic activity, slowing or reversing inflation, and expectations economic inflation Unstable inflation and the need to reaffirm commitment to the inflation target in an uncertain international environment are key concerns.

Bruno Palaciano, Bruno Martins and Claudio Ferraz believe the cycle's flight plan – which has proven to be “increasingly necessary” – should include an overall tightening of 1.5 percentage points.

“We prefer to mark the start of the cycle with a more modest pace (0.25bp), given the importance of the harmonic move, followed by two 0.50bp increases in November and December and a final 0.25bp upward move at the beginning of next year,” they say.

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Not cutting Silic could end BC's credibility

Analysts claim that since the members of the Monetary Policy Committee (Coboom) Put the possibility of an increase on the table, reinforcing that they are not offering it. guidance for the next meeting. However, they believe that “communications have gone far enough to allow the course to begin.”

“Should the cycle fail to materialize, there is a strong likelihood of a downward revision in risk premiums and an erosion of credibility, which could make the challenge greater in the future, except in what we consider risk scenarios at this time,” the claim said.

Palaciano, Martinez, and Ferraz also say that a change in interest rates now would favor monetary policy easing in 2025, especially if tax Providing support. “Dealing with a more deteriorating inflation scenario (with more uncertain expectations) will be more complicated later,” they say.

“We remain vigilant for upcoming economic data releases, particularly communications from British Columbia in the coming weeks to confirm or reassess our view ahead of the next meeting.”