BRAZIL: DI Rates End Lower As Investors Await Monetary Policy Decision

(RTTNews) - The one-day interbank deposit futures rates (DI rates) in Brazil ended lower Monday, with investors promoting the final adjustments before the decision of the Brazilian Central Bank's Monetary Policy Committee (Copom) on Wednesday. The movement in the forward curve was against the gains of the locally traded U.S. dollar.

"In the Copom's decision week, the prospect of keeping (basic) interest is against the strong speculation in the financial market for an additional tightening," said Infinity Asset chief economist Jason Vieira. He refers to bets on the forward curve, which came to forecast a 0.50 percentage point (pp) hike in the Selic this week.

Therefore, investors adjust their positions, which responded to "the short-term tensions," adds the economist, referring to the stress on the FX market.

"The latest inflationary indices should rather present a structural price pressure, but this movement does not even threaten the center of the inflation target, taking full meaning in a tightening," he said.

The analyst of Advanced Corretora, Alessandro Faganello, observes that the maintenance of the basic interest rate should only be changed "if the U.S. dollar escalation threatens the behavior of inflation". According to him, the weak economic activity also corroborates the Selic scenario at 6.50%.

The January 2019 DI contract rate was at 7.155%, from 7.30% at the previous session, while the January 2020 DI rate ended at 8.80%, from 9.04% on the same comparison. The January 2021 DI contract rate was at 9.79%, from 9.98%.