Interest rates are expected to rise again in 2020
Interest rates are expected to rise again in 2020, according to the SPX asset manager. However, there are some divergences in the market. The Focus report, published by the Central Bank, suggests an increase to 6.25%.
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Rogério Xavier, head of the SPX, says that monetary policy is quite accommodative, and that the Brazilian economy is recovering. He says there is no room for further cuts in the Selic rate. The firm also says that interest rate hikes are expected only in the third quarter.
Data indicates that inflation will also rise, which will cause the Central Bank to begin withdrawing much of its monetary stimulus.
In fact, the Brazilian economy is expected to increase by 2.5% in 2020. Assuming, even, that inflation remains at 4%, within the target.
Read on to learn all about interest rates in Brazil in 2020.
Selic interest rate
Firstly, it is important to say that after the economy improved, confidence among businesspeople and consumers was restored.
"In Brazil, we've come back from the brink. But we've only accomplished part of a much larger task by implementing the pension reform. There's still much to be done. The agenda is extensive and dense. Personally, I don't believe the government will approve any proposed constitutional amendments (PECs) in 2020. This is largely due to the calendar effect and a lack of parliamentary will to approve harmful measures in an election year. The issues that have some chance of progress are the autonomy of the Central Bank and, with a lot of luck, the parallel PEC for the states. On the other hand, in 2020, we may finally have some good news regarding privatization," says Rogério Xavier.
Subsequently, the Monetary Policy Committee (Copom) announced that the benchmark Selic rate will remain at 4.25% and that interest rates will no longer fall. The Copom also stated that the interest rate cuts that began in 2019 have reached their final stage.
"Considering the lagged effects of the easing cycle that began in July 2019, the Committee considers it appropriate to interrupt the monetary easing process," the Central Bank reports.
In fact, during President Jair Bolsonaro's administration, this was the fifth cut, which began in July 2019 following the pension reform.
What will the interest rate forecast be like in 2020?
Another point to highlight is that for Maurício Oreng, superintendent of Macroeconomic Research at Santander Brasil, the increase in the Selic interest rate will depend on our country's economic activity.
Furthermore, he also reports that recent figures suggest a reduced economic dynamism. In other words, these facts could contribute to the Central Bank postponing the withdrawal of monetary policy stimulus.
On the other hand, for those who are thinking about financing a vehicle, the market is booming and is expected to grow by 7.6%, due to the historic low interest rate.
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