Brazil cenbank chief says people understand monetary tightening is 'largely done'

Reuters

Published Aug 18, 2022 10:49AM ET

Updated Aug 18, 2022 01:11PM ET

By Marcela Ayres

BRASILIA (Reuters) -Brazilian central bank chief Roberto Campos Neto on Thursday said Brazil hiked interest rates earlier and faster than the rest of the world, and that people understand the monetary tightening is "largely done."

Since raising rates earlier this month to 13.75% from a 2% record low in March last year, policymakers have been giving stronger signals on their aggressive cycle wrap-up by emphasizing a new early-2024 inflation forecast, in contrast to their expectations for 2023, which had worsened.

"Brazil did its work earlier, faster, people understand that the central bank's work is largely done," said Campos Neto at an event hosted by lender BTG Pactual.

He stressed that changing focus on its inflation projections enabled the central bank to adapt its reaction function as government tax measures - some of which expire in December - are expected to ease inflation this year, but add to inflation next year.

Such a change is "obviously not permanent, it's temporary," he added.

According to Campos Neto, policymakers remain vigilant about the country's services inflation, understanding that recent measures to lower taxes on key prices generate lower inflationary inertia.

As the October presidential election approaches, he highlighted that whoever wins will have the challenge of looking at social spending and debt sustainability simultaneously.

Campos Neto, who will head the central bank for two more years of the next presidential term under the institution's newly acquired autonomy, said he would not accept being reappointed to the position afterward.