- Better-than-forecast inflation data boosted bets on rate cuts
- Bank chief wants to see downward trend before easing rates
According to Bloomberg article published on April 13, 2023, Brazil central bank chief Roberto Campos Neto told investors he was encouraged by this week’s inflation print but wants to see a downward trend before altering course, according to three people familiar with the conversations.
Policymakers are waiting for long-term inflation expectations to fall before they begin to ease interest rates, Campos Neto said at a Wednesday event held by XP Investimentos SA, according to the people present, who requested anonymity to discuss his presentation. The talk occurred alongside the International Monetary Fund’s spring meetings in Washington.
Annual inflation hit 4.65% in March, below the 4.71% median estimate from analysts surveyed by Bloomberg. The positive surprise stoked a rally in markets as traders re-calibrated odds of sooner-than-expected rate cuts.
A spokesperson for the central bank declined to comment.
The central bank has held the benchmark Selic steady at 13.75%, a six-year high. That has drawn the ire of President Luiz Inacio Lula da Silva, who argues that high borrowing costs are hurting investment and the nation’s poor. The leftist leader also sees high rates as a drag on the growth that would bolster his efforts to cut poverty and restore prosperity.
Lula’s economic team will present a new fiscal framework to congress in the coming days, a plan the government hopes will ease market fears about swelling debts and public spending and set the stage for lower interest rates. He publicly blessed the proposal this week.
Campos Neto said he was optimistic that Brazil’s congress would approve the public spending proposal without softening key aspects of it, according to one of the people in attendance.
