Bloomberg — Brazil’s central bank chief, Roberto Campos Neto, reiterated that a Selic benchmark rate of 12.75% should be enough to bring inflation expectations to target within a relevant horizon, according to a TV interview broadcast on Sunday.
Policy makers have added 975 basis points to borrowing costs since last March, the world’s most aggressive tightening cycle in the wake of the pandemic, to 11.75% and pledged to further increase the Selic rate to 12.75% by May.
“We understand that we have made quite a big adjustment that, in our view, is enough to bring inflation to target,” Campos Neto told Band News network, stressing that the effects of monetary tightening through rate hikes are usually felt after 12-18 months.
Yet, given uncertainties stemming from Russia’s invasion of Ukraine, the central bank signaled further increases could take place if needed.
As for recent capital inflows that have fueled the Brazilian real (BRLUSD) rally, Campos Neto cited higher interest rates, rising commodities prices, improved fiscal numbers in the short-term and a government agenda prone to reforms as some of the factors behind the ongoing foreign exchange move. “And some of these factors are more persistent than others,” he said.
Asked about fuel prices, Campos Neto deflected questions regarding Petrobras’s price policies, noting that the central bank’s role in meetings with government officials on the state-run company is “purely technical.”