Dollar rises and closes at R$ 5.14 after another cut in interest rates and Central Bank divided

At the day’s high, the US currency reached R$5.17. (Photo: EBC)

The dollar closed up more than 1% this Thursday (9), as investors reflected on the new decision of the Monetary Policy Committee (Copom), released the day before. Ibovespa, the main stock index on the Brazilian stock exchange (B3), closed down 1%.

On Wednesday (8), the Central Bank of Brazil (BC) decided to reduce the Selic by 0.25 percentage points, contrary to its own estimates – in March, the collegiate had predicted a cut of 0.50 pp at this month’s meeting .

The movement, according to experts, reflects the worsening of the fiscal situation and the maintenance of interest rates in the United States.

On the agenda, investors also monitored a series of local and international indicators released throughout the week, in addition to several corporate balance sheets.

What happens?

This week’s main highlight is Copom’s monetary policy decision. The BC decided to reduce the pace of cuts in the basic interest rate and reduced the Selic by 0.25 pp, contrary to its own estimates.

At the March meeting, the institution had estimated to promote another 0.50 pp cut in the Selic in May, in line with the reductions in recent meetings.

Since then, however, the scenario has changed a lot. In mid-April, after the government proposed reducing the targets for public accounts in the coming years, Campos Neto stated that the BC’s work to drive inflation to pre-established levels had become more “costly and difficult”.

This is because, by enabling more public spending in relation to what was previously expected with the change in fiscal targets, the tendency is for greater pressure on inflation in the coming years – making it more difficult to control.

Furthermore, the scenario of uncertainty gained even more strength after the Federal Reserve (Fed, the North American central bank) signaled that interest rates in the world’s largest economy could take longer to fall.

Last week, the US Central Bank kept the country’s interest rates unchanged at between 5.25% and 5.50% per year, the highest level in 20 years, reemphasizing caution with inflation. 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.