BRASILIA (Reuters) – Brazil’s central bank chief Roberto Campos Neto said on Monday consumer prices continue to trend higher as core inflation speeds up despite aggressive monetary tightening by policymakers.
“We actually see an inflation trend that is still growing,” he said in an online event hosted by television channel AgroMais.
He noted that only Brazil and Russia’s current interest rates are above the neutral level, which supports the economy at full employment without pressuring or decelerating inflation. A higher than neutral level is necessary to cool inflationary pressures and bring prices closer to central bank targets, Campos Neto said.
The Brazilian central bank has already raised rates to 10.75% from an all-time low of 2% in March last year, and indicated further adjustments to tame inflation that hit 10.4% in the 12 months through January.
Despite rising borrowing costs, Campos Neto said he believed analysts who are forecasting meager growth for Brazil this year will adjust their numbers upwards due to recent domestic data.
According to him, the most crucial point for the central bank today is to understand how the normalization of monetary policy will take place in an environment of higher global inflation, in which energy inflation “seems more persistent.”
He stressed that the central bank was looking to analyze what effect this, along with China’s slowdown, would have on emerging markets.
Source: Economy - investing.com
