High interest rates in the US hurt Brazil, says Citi executive
RIO DE JANEIRO, BRAZIL – The expectation that the Fed – Federal Reserve System, the central bank of the United States – will raise the North American interest rate again in a meeting scheduled for this Tuesday (May 3) and Wednesday (May 4) caused the stock market to fall and the dollar to rise again last week.
The chief economist of Citi Brazil, Leonardo Porto, said in an interview to Estadão published on May 2 that the rise in interest rates harms emerging countries, such as Brazil, by favoring the outflow of capital and increasing the dollar value.
“We are going into a monetary tightening cycle in the USA that we have never seen in the last decades. (…) This is already provoking a significant increase in international interest rates,” said the economist.
According to him, according to Citi’s projections, “the Fed will have to raise 0.5 percentage points in the next four meetings and then 0.25 percentage points until the end of the year, and will continue to raise interest rates until they exceed 3.75% at the end of next year”.
BRAZIL
According to Porto, despite the “extremely high inflation”, the rise in prices in Brazil should be “close to the peak”. The Citi team estimates that the worst month has already passed: it was April, with “inflation close to 12%” in 12 months.
Now, the trend is downward. The end of the tariff flag on the electricity bill, the stabilization of oil prices, and the drop in the value of commodities projected for the medium and long term, associated with the Central Bank’s monetary policy, should hold inflation in the coming months.
The problem is the speed of the drop: “The problem is that the distance between the 12% and 3.5% of the inflation target for this year and the 3.25% for next year is very big. This year, it will not even be possible to reach the target ceiling. The forecast is that inflation will be 7.8%, above the ceiling. For next year, we think that inflation will be above the center of the target, but within the band, at 3.9%,” he said.
Citi analysts expect that the Selic will rise one percentage point in the next meeting of Copom (Monetary Policy Committee of the Central Bank), which will also be held this Tuesday (May 3) and Wednesday (May 4). The estimate is for another 0.5 percentage point increase for the June meeting, reaching 13.25%.
With information from Poder360
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+0.30%
175,664.62
+0.30%
65,484.32
-0.53%
11,445.90
-0.22%
2,979,472
-0.72%
2,457.87
-1.28%
60,779.49
-1.40%
| Instrument | Last | Change | YoY | Prev. | High | Low | Volume |
|---|---|---|---|---|---|---|---|
| IBOV | 175,664.62 | +0.30% | +21.85% | 175,135.41 | 168,310 | 167,142 | — |
| USD/BRL | 5.16 | +0.01% | -5.13% | 5.16 | 5.18 | 5.14 | — |
| SELIC | 14.00% | — | — | — | — | — | |
| PETR4 | 41.64 | -0.05% | +35.19% | 41.66 | 41.97 | 41.15 | 41,499,400 |
| VALE3 | 72.97 | +0.83% | +30.75% | 72.37 | 73.54 | 72.66 | 17,658,000 |
| ITUB4 | 38.60 | -1.03% | +4.57% | 39.00 | 39.34 | 38.39 | 29,487,800 |
| BBDC4 | 16.85 | +0.36% | +3.50% | 16.79 | 16.90 | 16.67 | 19,416,900 |
| BBAS3 | 19.37 | +0.47% | +0.73% | 19.28 | 19.44 | 19.16 | 11,069,200 |
| B3SA3 | 14.26 | -0.21% | +12.73% | 14.29 | 14.47 | 14.11 | 33,037,800 |
| ABEV3 | 14.89 | -0.80% | +21.91% | 15.01 | 15.07 | 14.81 | 16,453,100 |
| WEGE3 | 47.59 | +0.49% | +29.99% | 47.36 | 48.08 | 47.36 | 3,364,600 |
| PRIO3 | 59.14 | -0.19% | +50.67% | 59.25 | 59.81 | 58.74 | 3,325,600 |
| SUZB3 | 41.33 | +2.35% | -23.55% | 40.38 | 41.48 | 40.35 | 3,914,900 |
| RENT3 | 34.68 | -0.09% | +0.84% | 34.71 | 34.96 | 34.35 | 7,979,100 |
| AZZA3 | 15.89 | -2.63% | -53.76% | 16.32 | 16.42 | 15.82 | 1,330,300 |
| CSNA3 | 4.30 | +0.47% | -42.65% | 4.28 | 4.41 | 4.26 | 10,076,100 |
| GGBR4 | 24.69 | +2.19% | +51.38% | 24.16 | 24.85 | 24.18 | 7,047,600 |
| ENEV3 | 24.21 | -1.38% | +70.49% | 24.55 | 24.64 | 23.99 | 9,297,000 |
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