Interest rate scenario requires caution with fixed rates and inflation

The interest rate decisions announced last Super Wednesday continue to be on investors' radar. In the United States, the Fed (Federal Reserve) kept interest rates between 3.5% and 3.75%.

In Brazil, the Copom reduced the Selic rate to 14.25% per year, but the Central Bank's communication generated different interpretations about the pace and limits of the cycle of cuts.

For Marilia Fontes, presenter of Resenha do Dinheiro, the change in tone observed at the last Fed meeting was influenced by Kevin Warsh's debut as president of the institution. According to her, the leader adopted a tougher speech in relation to combating inflation.

Warsh has also advocated structural changes at the US central bank. Bernardo Pascowitch, founder and CEO of Yubb, states that the director proposes a broad review of the institution.

"The new chair wants to reform several areas of the Fed, from the data collection methodology to the way information is communicated to American society. In practice, this is a proposal to reformulate the most important central bank in the world", he explains.

In contrast, in Brazil, the scenario was different. The Copom (Monetary Policy Committee) reduced the Selic rate, but the main controversy was the change in the so-called relevant horizon of monetary policy, the period used by the BC to assess the future behavior of inflation, assesses the presenter.

"Traditionally, monetary policy looks at the effects of inflation about two years ahead. At this meeting, the Central Bank extended this horizon to two years and one quarter. This allowed it to show a greater convergence of inflation towards the target", he analyzes.

The change drew attention because it was interpreted by the market as a movement against the global scenario, at a time when inflation expectations remain above target and several central banks maintain a cautious stance in relation to interest rates.

For this reason, the decision generated questions and even left analysts "confused" about the next steps of Brazilian monetary policy.

As a result, the day after the announcement, short-term interest rates fell, but long-term interest rates rose significantly.

"It was a sign that part of the market interpreted the measure as a more lenient stance towards inflation. Those who were positioned in longer-term fixed-rate securities suffered from the mark-to-market", says Marilia.

For Thiago Godoy, financial educator, the main risk is changing the expectations of economic agents.

"The market lives on expectations. When there is a change in the way investors see the trajectory of interest rates, the impacts appear mainly on long-term assets. The problem is that, if it is necessary to raise interest rates again later on, there may be a rebound effect", he observes.

Faced with this scenario of uncertainty, experts advocate a more cautious stance in investor allocation. Fixed-rate bonds tend to be more sensitive to fluctuations in interest rate expectations.

"In times of volatility, assets indexed to inflation, such as IPCA+ bonds, can offer greater protection and profitability, in addition to helping to diversify the portfolio", he advises.

Dinheiro Review
Carried out with the support of B3 and the investment manager BlackRock, the program is presented by Thiago Godoy, the "Financial Daddy", Marilia Fontes, founding partner of Nord Investimentos; Bernardo Pascowitch, founder and CEO of Yubb, proposes a light, direct and uncomplicated approach to topics related to financial education and investments. The attraction addresses the main themes of the economy weekly with the informality of a conversation between friends - without compromising on analysis.

The Money Review airs every Friday, at 7pm, on the CNN Money YouTube channel and on Sundays, at 3pm, on CNN Brasil.

Source: CNN