Brazil’s Central Bank Projects Stronger Growth and Higher Currency Exchange Rates After Recent Policy Meeting – Reuters

Brazil’s Central Bank Sees Strong Economic Growth and Adjusts Rate Outlook

BRASILIA – A director of Brazil’s central bank stated on Thursday that recent economic indicators suggest stronger growth in the country, with trends observed by policymakers proving to be persistent.

Speaking at a UBS event, Diogo Guillen commented that the exchange rate is currently higher than it was in July. He also pointed out that inflation expectations have remained largely unchanged, which continues to be a concern for the central bank.

Recent data from Brazil’s statistics agency indicated stronger-than-anticipated economic activity in the second quarter, reinforcing market speculation that the central bank may raise interest rates during its upcoming meeting on September 17-18.

The benchmark interest rate has been stable at 10.50% since June. After central bank president Roberto Campos Neto indicated that any potential adjustments to borrowing costs would be gradual, Guillen mentioned that minutes from the most recent policy meeting showed officials discussing the possibility of maintaining the current rates for an extended period while also emphasizing the need for adjustments if warranted.

"This signals a gradual approach to any forthcoming changes," he remarked.

Guillen stressed that the central bank’s credibility is derived from its commitment to achieving an inflation target of 3%.

He stated, "The focus is on whether economic conditions necessitate a shift in policy to bring inflation back to the target. Based on that assessment, we will take the appropriate actions."

He underscored the collective commitment to achieving the inflation target, noting significant agreement among members of the rate-setting board regarding their evaluations of the domestic economy, external uncertainties, and slower global growth.