Brazil Central Bank’s June Policy Decisions Hinge on Data, Says Governor


Governor Roberto Campos Neto of Brazil’s central bank expressed uncertainty regarding the institution’s course of action at its June meeting, stressing a reliance on forthcoming data amidst ambiguity surrounding future rate cuts.

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Policymakers emphasized this week the challenges in predicting the trajectory of inflation, both domestically and internationally, leading to a revision in forward guidance. The central bank now anticipates a 50-basis-point rate cut at the upcoming May meeting, having previously hinted at multiple reductions.

“In times of unclear visibility, we acknowledge the importance of assessing the evolving scenario until then,” Neto stated during a press conference on Thursday.

The bank disclosed that “some members” of its rate-setting committee advocated for a cautious approach to monetary easing in the face of persisting uncertainty.

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Economic policy director Diogo Guillen clarified that differing viewpoints within the committee did not necessarily signify unanimous disagreement.

Since the inception of the monetary easing cycle in August, policymakers have reduced the benchmark interest rate by a cumulative 300 basis points to 10.75%.

In its quarterly inflation report released on Thursday, the central bank acknowledged a higher-than-expected uptick in consumer prices, primarily driven by increases in administered prices and food costs.

Despite projecting modest inflationary movements ahead, the bank’s forecast suggests a slower pace of disinflation compared to previous years.

The bank also upwardly revised its economic growth projection for the year to 1.9%, citing a dynamic labor market, stronger wage growth, and signs of recovery in the credit market.

However, the central bank’s growth forecast remains conservative compared to the government’s estimate, with Finance Minister Fernando Haddad hinting at a potential upward revision to above 2.5%.

Private economists surveyed by the central bank anticipate a more modest output growth of 1.85% for the year.

In its report, the central bank revised upwards its forecast for bank lending expansion in 2024 but lowered the projected annual trade surplus due to downward revisions in export values, particularly in soybeans.

Consequently, the central bank now anticipates a larger current account deficit for the year.

Data Source: reuters

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