SAO PAULO (Reuters) – Brazil’s central bank monetary policy director said on Tuesday that an eventual change to its monetary easing guidance would not necessarily correlate with what the interest rate would be at the end of bank’s easing cycle.
In an event hosted by consultancy firm APCE, the monetary policy director, Gabriel Galipolo, said given the way that the disinflation process and the pace of rate cuts have been unfolding, an eventual change in guidance does not mean a correlation with a terminal rate.
“The absence of a signal from Copom about the terminal interest rate stems from the fact that we adopted the 50-basis-point pace precisely to take advantage, gain time and see how things will unfold,” he said.
The central bank kicked off its easing cycle in August with a 50-basis-point cut after nearly a year of unchanged rates at a six-year high of 13.75%, aimed at combating inflation.
Since then, it has consistently signaled the maintenance of the same easing pace for the meetings ahead.
Galipolo highlighted that, despite the reduction in the differential between the country’s interest rates and those of advanced countries, which have been delaying the start of their own interest-rate-easing cycles, Brazil’s exchange rate has performed well.
“Even with this differential closing, the exchange rate has remained at a good level,” he said.
Asked if the central bank had a target for the exchange rate, Galípolo denied the existence of a goal, arguing that a floating exchange rate is an important “line of defense.”
Last week, the central bank’s director said that “at some point” policymakers will need to remove the use of the plural in their monetary easing guidance, which has been flagging 50 basis point cuts for the upcoming “meetings”.
Brazil’s benchmark interest rate now stands at 11.25%.
(Reporting by Fernando Cardoso; Writing by Andre Romani; Editing by Steven Grattan and Leslie Adler)
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