The rises in the dollar, gold and the barrel of Brent oil were not predicted by the financial market when responding to the Central Bank’s Focus survey, last Thursday, March 28. As on the same day the president of the Federal Reserve, Jerolme Powell, expressed concern about data on the heating of the American economy, it seems clear that the rise in asset prices is more linked to the increase in tensions in the Middle East, after the bombing by Israel , from the Iranian embassy in Syria, than to changes in the beginning of the fall in interest rates in the United States, as attributed in Brazil.
The rush to protect gold is traditional in times of geopolitical tensions, because its price also incorporates variations in strong currencies (dollar or euro, depending on the trading market). On Nymex (New York Mercantile Exchange), after closing March with an increase of 8.94%, the contract for delivery in June rose 0.84% on Monday and jumped again by 0.90% at 1 pm today. In 12 months, gold rose 15.5%.
The Brent barrel also rose in contracts for future delivery in June, jumping 1.35% today, at the same time, reaching over US$88.60 per barrel. As can be seen, the forecast of stability of the dollar exchange rate in Brazil predicted by Focus at R$ 4.95 was overturned by political facts, with the fear that tensions between Israel and Iran will spread the conflict beyond the nation’s neighborhood. Jewish. After being traded at R$5.07 yesterday, with an increase of almost 1%, the dollar fell this morning to R$5.0455, but rose again after lunch to above R$5.018, down 0.05% compared to the previous day.
Before the crisis, Focus via IPCA calm
In the Focus Survey released today (Tuesday, April 2) by the Central Bank, it is clear that economists from banks and consultancies were already dreaming of Easter eggs when they answered the questionnaires predicting a calm week for domestic and foreign markets. Which didn’t happen.
In the optimistic view, inflation in March (which IBGE releases on the 10th, next Wednesday) and the IPCA rate in March plummets to 0.23%, a considerable drop after the 0.83% in February, indicating the loss of momentum in food and the dilution of increases in Education and Communications. For April, the forecast is for an IPCA of 0.30% and the rate would fall to 0.22% in May.
Last year, from January to May, the IPCA rose 2.95%. If market projections are not overturned by the uncertain external scenario, the accumulated rate for the first five months of 2024 would be 2.01, a drop of 0.94 percentage points compared to last year. Therefore, the market maintained the IPCA forecast at 3.75% for this year (3.74% in responses from the last five business days) and the Selic rate at 9%. For 2025, the expected IPCA is 3.51% (3.54% in 5-day responses) and Selic at 8.50%, a level maintained until 2027.
GDP adjustments upward
But the market reacted late to the Central Bank’s increase in this year’s Gross Domestic Product forecast. In the Quarterly Inflation Report, released by the BC on the 18th, the Central Bank board raised the projection from 1.7% (in December) to 1.9% (the Treasury predicts 2.2%).
But the market projected a median rate of 1.89% (1.85% in the previous week). 40 days ago the forecast was 1.60%. For 2025 to 2017, the market predicts 2% growth in GDP.
Interest falls down the ladder
Once again the maxim was proven in the release of credit statistics by the Central Bank until February. “Bank interest rates go up in the elevator and down in the stairs.”
Since the Monetary Policy Committee began lowering the Selic rate, which was at 13.75% per year, on August 2, 2023, the country’s basic interest rate fell 3 percentage points until March 20, to 10. 75%. In February, they were at 11.25% per year. But the Selic was always less than a third of the level of free market interest charged to individuals.
Therefore, a three-point drop in the interest rate floor should cause a much greater drop in bank spreads for financing to individuals. But, look at the rise in bank interest rates since 2022 (in August of that year the Selic rose from 13.25% to 13.75% and stayed that way for 12 months):
OLM
It is worth mentioning that interest rates only fell on INSS payroll loans, due to the intervention of the Ministry of Labor and Social Security and pressure from Congress on credit card revolving rates.
