Investors seeking rate clues in Brazil ‘confirmation hearing’

Bloomberg

Roberto Campos Neto needs no introduction in financial markets, but his thoughts on how the central bank could boost Brazil’s recovery have remained a mystery.
While the money-making talents of the former Santander treasurer are well known, the Senate confirmation hearing should finally reveal what the nominee for the central bank’s presidency thinks about interest rates, inflation, and Brazil’s $380 billion stockpile of international reserves. Unlike previous nominees, Campos Neto, 49, has no record of academic papers or public speeches for investors to pore over.
“No one is familiar with Campos Neto’s theoretical views, and whether he will focus only on inflation or also on activity,” Newton Rosa, chief economist at Sul America Investimentos Dtvm and one of the top Brazil key rate forecasters in Bloomberg surveys, said. “We don’t have any idea.”
Campos Neto’s confirmation is seen as nearly certain, given that he enjoys the backing of a freshly elected government and has spent the last few weeks schmoozing Senators.
Between a more challenging global outlook and uncertainty over efforts to fix Brazil’s public finances, investors disagree as to whether a cut to the benchmark Selic rate is on the cards any time soon. Doves point to slow growth, on-target inflation expectations and decent prospects for a pension reform that would shrink a gaping budget deficit.
But economists at BNP Paribas aren’t convinced, as they see policy makers lifting the key rate this year amid a prolonged debate that’ll end up halving the projected savings from the pension bill.
The hearing before the Senate’s Economics Affairs Committee is scheduled to start at 10:00 a.m. in Brasilia. Aside from Campos Neto, Senators will also vote on two nominated bank directors, Joao Manoel Pinho de Mello and Bruno Serra Fernandes.
Securing a simple majority from both the committee and then the Senate floor would allow all three to participate in the next rate-setting meeting on March 20.