Good morning! Today, Central Bank shows its concern about “uncertainty.” New electoral polls show an unchanged picture. Brazil’s mobile telephony market set to become even more concentrated.
Central Bank fears fiscal mismanagement
The Central Bank published the minutes of its latest meeting, in which it raised the Selic benchmark interest rate to 10.75 percent. While not including much new information, the word choice of the monetary authority deserves attention, mentioning “uncertainty” four times in the document.
Why it matters. Central banks tend to avoid talking about uncertainty because it could fuel the perception among markets that authorities might not feel fully prepared to respond to challenges.
Big worry. The way the Brazilian monetary authority talks about uncertainty highlights worries that the government will open up the money faucet as President Jair Bolsonaro seeks to improve his re-election prospects (more below). Two of the four mentions concern “uncertainties regarding the fiscal framework.”
- Last year, the government fought — and won — in Congress to approve a constitutional amendment capping court-ordered debt repayments scheduled for this year. Essentially, it received a license to default.
- Now, the government is moving towards trying to artificially tame fuel prices by cutting federal levies on gasoline and diesel.
- The...