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Brazilian stock market hits new high amid optimism about interest rate cut.
The Ibovespa closed above 157,000 points this Tuesday (November 11), marking its 12th consecutive record and surpassing the 158,000-point mark for the first time. The main index of the Brazilian stock exchange rose 1.60%, to 157,748.60 points, consolidating the longest winning streak since May-June 1994, when it also recorded 15 consecutive gains.
At its peak during the trading session, the Ibovespa reached 158,467.21 points, surpassing the 156,000, 157,000, and 158,000 point marks within minutes of opening. The dollar, meanwhile, closed below R$ 5.30, reflecting the confident mood in the market.
What drove the increase?
The positive performance of the Brazilian stock market is directly linked to Investor optimism regarding a possible interest rate cut.. Inflation in October slowed to 0.09%, below expectations and reaching its lowest level for the month since 1998. Over the 12 months ending in October, the IPCA (Brazilian consumer price index) registered an increase of 4.68%.
The Central Bank reinforced in the minutes of the previous meeting that it maintains a stronger conviction that the Selic rate — currently at 15% — should remain at this level for a fairly long period to meet the objective of bringing inflation to the target of 3%. Furthermore, the Central Bank observed a more benign inflation dynamic than expected and some improvement in service sector inflation.
Financial market context
The external environment also contributed to the appetite for risk. With the cut in US interest rates and the maintenance of the Selic rate in Brazil, there is a greater flow of North American capital into the country, allowing investors to take advantage of the interest rate differential between the two economies.
The stock market's appreciation this year has already reached 24.3%, approaching the target price of 153,000 points projected for the end of 2025. Analysts point out that the expectation of future interest rate cuts makes riskier assets, such as stocks, more competitive in the market.
Market outlook
The financial market has reduced its inflation forecast for Brazil to 4.55% by the end of 2025, still above the upper limit of the target of 3% (with a tolerance range of 1.5 percentage points). Analysts estimate that the benchmark interest rate will end 2025 at 15% per year, with expectations of falling to 12.25% by the end of 2026.
The next Copom meeting is scheduled for December 4th and 5th, when the committee will reassess the Selic rate level.
Photo by Vadim Shevyrin on Unsplash
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