Economy

Brazil’s central bank director says more rate hikes may happen after June

Brazil‘s central bank Monetary Policy Director Bruno Serra indicated on Monday that policymakers have not ruled out further interest rate hikes beyond June, saying “time will tell”.

The remarks come amid market discussions on the need for an even stricter monetary tightening cycle at a moment when inflation expectations keep drifting further above official targets.

Earlier in May, the central bank raised interest rates by 100 basis points to 12.75%, from a 2% record low in March last year, signaling a smaller adjustment for next month.

READ ALSO: Brazil’s Central Bank has started to discuss a proposal for regulating the country’s new foreign exchange law

“We put ourselves in a situation of signaling another hike as probable. From now on, time will tell,” said Serra while participating in a conference hosted by Goldman Sachs.

He acknowledged preferring lower interest rate fluctuations but recognized that this is not always possible.

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“Preferring the scenario of interest rate stability for a longer period is one thing, but we are not tied to a specific scenario. We are tied to chasing the center of the (inflation) target in the relevant horizon as we have done in recent years.”

Serra said that maintaining high interest rates for a longer period to tame inflation is preferable, when possible, to raising rates and then quickly lowering them.

After a recent depreciation of the Brazilian real, he said the currency was affected mainly by the weakening of the yuan, but also by the U.S. monetary tightening. Despite this, he added that the trend for the exchange rate is to perform “much better” than in 2020 and 2021.

This post was last modified on May 16, 2022 4:01 pm

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