Brasilia - The president of the Paraná Industrial Federation (Fiep), Rocha Loures, called the decision by the Monetary Policy Committee to keep the country's basic interest rate (Selic) unchanged at 16.5% annually, "a cold water bath for the economy." Loures added that the government was making it difficult for the economy to reach its own level of activity. "The high interest rate policy represses development," he declared.
Spokesmen for the Rio de Janeiro industrial federation (Firjan) declared that there was room for further reductions in the rate and they were disappointed. A note said there was no danger of a generalized increase in prices and that a window of opportunity had been closed, a window leading to the possibility of renewed growth.
The Rio commercial federation (Fecomercio/RJ) was harsher in its criticism of the Copom decision. "This is not welcome news for an economic segment where sales were down 3.6% in 2003. We represent 318,000 firms that employ 1.8 million people. And we can tell you that there is no inflationary pressure due to demand," declared Orlando Diniz, president of the Fecomercio/RJ.
On the other hand, according to the director of variable income at the Banco Santos, Eduardo Fornazier, the Copom decision was expected. But he pointed out that the decision was based on projected rises in the Broad Consumer Price Index (IPCA), which should not be the case in March making it possible to reduce the Selic by 0.25 percentage points at that time (that is, at the next Copom meeting which begins on March 16).
Finally, economist Alberto Furuguem, of the Economic Policy Council at Fecomercio/RJ (Conselho de Política Econômica da Associação Comercial do Rio de Janeiro), said the Copom decision to keep the Selic at 16.5% without any further indication of whether it will rise or fall at the next meeting was not a surprise. Furuguem said the decision was in keeping with average market expectations. "It just shows a conservative positioning of the Central Bank, but it does not rule out further reductions in the future," he declared.
Furuguem pointed out there were no threats of inflation in March or April, with the recent price spike at an end. Therefore, he said, he believed that the Selic should continue to drop in the next few months.
The Fecomercio/RJ economist concluded by saying that in his opinion the great anti-inflacionary anchor this year is going to be the exchange rate. He pointed out that the dollar closed out 2003 at less than R$3.00, compared to market estimates of up to R$3.20. He added that the trade surplus had helped keep the dollar down and without pressure from prices there was no reason not to expect further reductions in the interest rate. (AB)
