Campos Neto says the external scenario carries two messages: rising US interest rates and a changing Chinese model

president central bank (B.C.E), Roberto Campos NetoThis Monday, the 23rd, I estimate that the explanation that is starting to come together regarding the possible causes of rising interest rates in the United States is less benign and more structural.

The BC president added that if the rise in yields on US bonds has a structural reason, the question remains how long interest rates will continue to rise.

This came during the “Reflections on the Brazilian Economic Scenario” event that I organized conditionPowered by Broadcast, in partnership with B3 Let’s investNews and educational content website produced by Bolsa.

In recent weeks, the perception that US interest rates could remain higher for an extended period of time has opened up a debate in Brazil about how large the Selec interest rate cutting cycle should be – currently at 12.75% per year.

“The less moderate and more structural interpretation is becoming clearer. “Being structural, there is a question: How long will interest rates continue to rise?” commented Campos Neto, at the opening of the event at the headquarters of the European Central Bank. condition. He also said he expects another US interest rate hike in December.

When listing the various explanations for rising interest rates in the United States, the BC president pointed, in addition to the financial issue, to currency interventions in China, the seasonality of the country’s bond auctions, and the worsening country risks in China. The largest economy in the world.

In Brazil, analysts consulted by the Fox report expect the policy rate should fall to 9% next year, but the latest signals from the global economy have prompted some economists to revise that forecast.

Last week, for example, Citigroup raised its forecast for Selec stock from 9% to 10% at the end of the cutting cycle. One factor highlighted by the bank is the expectation that global interest rates will rise.

In an interview with condition, BNP Paribas head of research for Latin America, Gustavo Arruda, also acknowledged that Selek It may be close to the 10% level. If the US economy does not slow down and the Federal Reserve is allowed to lower interest rates.

“We have a base scenario of 8.5% interest rates in Brazil. This figure assumes a slowdown in the US economy, which is a perception that US interest rates will fall at some point,” Arruda said. “In the discussions we have had within the bank, the base scenario assumes a slowdown.” In the first and second quarters of next year. But as the data emerged, we began to wonder if this would happen.

In analyzing the external scenario, Campos Neto also pointed out that China has changed its growth model to innovation and consumption, rather than investment and construction. He pointed out that “the Chinese government itself said that the change in the model would lead to lower growth.”