Another "Super Wednesday" on the horizon!

CAUSE: Market attention this week is entirely focused on the interest rate decisions taking place in Brazil and the US next Wednesday. In Brazil, the Central Bank is expected to raise the Selic rate by 1 percentage point to 14.25% per year, as previously signaled in recent statements, due to persistent inflation in the country. In the US, the base rate, currently in the 4.25% to 4.50% per year range, is expected to remain unchanged. Although inflation eased slightly in the latest report, uncertainty surrounding the new economic policy being implemented by the new US administration is a primary reason for the Fed to opt for holding rates steady at this time.

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CONSEQUENCE: To some extent, the market has already priced in both decisions and should only see residual adjustments following the official results, provided there are no surprises relative to current expectations. The exchange rate, in turn, may benefit here in Brazil due to an influx of speculative capital, as we will have a more attractive interest rate. On the other hand, higher interest rates for an extended period tend to hinder our economic growth, and we have already seen projections being revised downward for some time, according to the Central Bank's Focus survey.

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