Another Super Wednesday is coming up!

CAUSE: This week, global markets are closely monitoring monetary policy decisions in Brazil and the United States—the famous "Super Wednesday"! Both moves have the potential to influence investor behavior and the trajectory of emerging economies. In the U.S., the Federal Reserve is expected to keep interest rates at their current level (a range of 4.25% - 4.50% p.a.), reinforcing a cautious stance in the face of persistent inflation signals and a still-hot labor market. In Brazil, the prevailing expectation is that the Central Bank will make a more moderate adjustment this week, opting for a 0.50 percentage point hike, bringing the Selic rate to 14.75% p.a. If confirmed, this decision reflects an ongoing adverse scenario marked by high inflation expectations, concerns over the impact of the trade war, and the need to reinforce the monetary authority's credibility.

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CONSEQUENCE: The signal of a Selic rate hike is fully priced in by the financial market at large; however, it tends to cause well-known impacts on the Brazilian economy, among which we highlight: 1. Higher cost of credit; 2. Reduction in consumption and investment; 3. Negative effects on short-term growth. On the other hand, the measure may curb the depreciation of the real and help anchor inflation expectations, especially in a context of external pressure caused by U.S. monetary policy and the trade war. The combination of high interest rates in the U.S. and a Selic hike in Brazil illustrates the challenges faced by emerging countries: the need to preserve macroeconomic stability in a global environment of uncertainty and risk aversion.

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