The dollar opened lower this Thursday (2), following the United States interest rate decision by the Federal Reserve (Fed, the North American central bank) the day before.
The institution kept the country’s basic rates unchanged, between 5.25% and 5.50%. The result was already widely expected by the market, but attention turned to the statement released by the Fed shortly after the meeting.
According to the document, there is no forecast of further increases in interest rates, which reflects positively on the markets. However, the market believes that the rate cut should only begin in September, after the Fed stated that it was unable to make progress with the objective of bringing American inflation to the target of 2% per year.
See below for a summary of the markets.
On Tuesday, the North American currency closed up 1.52%, sold at R$5.1927.
As a result, he accumulated:
- advance of 1.49% in the week;
- increase of 3.54% in the month;
- gain of 7.01% in the year.
Ibovespa ended with a decline of 1.12%, at 125,924 points.
On Tuesday, the index fell 1.12%, to 125,924 points.
As a result, he accumulated:
- drop of 0.48% in the week;
- decline of 1.70% in the month;
- losses of 6.16% in the year.
Understand what makes the dollar rise or fall
What’s moving the markets?
In the first trading session of the Brazilian market after the Fed’s monetary policy decision, investors reflected, above all, the Committee’s statement, which emphasized caution with inflation.
“In recent months, there has been no new progress towards the 2% inflation objective”, reported the collegiate, reinforcing that recent indicators of the North American economy continued to expand “at a solid pace”.
Annual inflation in the United States is stagnant at around 3%, after spiking throughout 2022 and reaching a record level of 9%. Despite the drop, the price indicator did not return to within the Fed’s target, which is 2% per year.
Therefore, the institution continues to send signals to the market that interest rates in the largest economy in the world may take longer to fall. According to the FedWatch tool, which brings together market projections for interest rates in the United States, a rate cut cycle should only begin in September – or even after that.
With the release of the data, 10-year Treasury rates, a global reference for investments, showed an even greater drop, and experts indicated that the chance of the Fed starting to cut interest rates in September was on the radar.
Higher interest rates in the USA end up driving investments into the largest economy in the world, which takes money away from other markets, especially emerging ones, such as Brazil.
In addition to the effect of American interest rates on the Brazilian economy, there has been a worsening in the risk situation since the federal government announced the change in the fiscal target for the coming years. For 2025, the government proposed a zero fiscal target, instead of a surplus of 0.5% of GDP, and a reduction also for the coming years.
The decision ended up being seen by the market as a defeat for the economic team, which initially defended at least a primary surplus of 0.25% of GDP. It was also interpreted that the decision opens space for more spending and less debt control, which demands higher interest rates so that foreign investors find the country attractive.
Additionally, the Central Bank monitors the strength of the job market. Economists understand that a smaller number of unemployed people and an increase in income without productivity gains can generate pressure on inflation.
Data from the Ministry of Labor and Employment show that Brazil created 244.3 thousand formal jobs in March, an increase of 25.7% compared to the same month last year. It was the largest generation of formal vacancies for the month of March since the beginning of the new Caged historical series, in 2020.
The government wanted the project to end, but had to negotiate with Congress, which defended its continuity. The number of sectors covered, currently 44, will fall to 30, according to the project.
After agreement between the economic team and Chamber leaders, it was possible to stipulate a spending limit of R$15 billion with tax exemptions until 2026. The duration of the program will, therefore, be limited in two ways: when it reaches the value of R$15 billion or when it reaches December 2026.
