Brazil’s Central Bank Chief: No Need to Signal Actions Beyond January Meeting, Reports Reuters

BRASILIA (Reuters) – The central bank of Brazil indicated potential interest rate cuts of 50 basis points in its upcoming meetings in December and January, with Governor Roberto Campos Neto expressing that there is little benefit in projecting any further steps at this time due to prevailing uncertainties, both globally and locally.

During a presentation at an event hosted by Bradesco Asset Management, Campos Neto emphasized that upcoming policy meetings would be an opportunity to evaluate various factors, including the progress of fiscal measures in Congress aimed at stabilizing the nation’s public finances. “We understand that signaling much more than this has no expected value given so much uncertainty that exists,” he mentioned.

He reaffirmed the bank’s commitment to maintaining a restrictive terminal interest rate as part of its easing cycle. Campos Neto also noted that Brazil continues to have a significant interest rate advantage over advanced economies, providing the central bank with some flexibility in monetary policy decisions.

However, he warned that the liquidity environment is likely to tighten, stressing the importance of the country addressing its fiscal issues.

In response to comments from President Luiz Inacio Lula da Silva regarding the government’s plan not to eliminate its primary budget deficit next year, as previously suggested to Congress, Campos Neto acknowledged that this could introduce additional fiscal risks to the bank’s decision-making process, though not in a straightforward manner.

In the minutes from its most recent policy meeting, where the central bank lowered the benchmark interest rate by 50 basis points for the third consecutive time to 12.25%, it was highlighted that significant challenges remain in achieving the official inflation target, and that discussions regarding the complex external environment are ongoing.