“We have all options open because uncertainty has increased, making us more data-dependent,” he said at a credit cooperatives forum in Goias state.
Galipolo stressed, when asked what could lead the bank to resume rate cuts, that policymakers are not providing any guidance in a more challenging environment marked by a stronger labor market and pressure on the Brazilian real.
The central bank paused an easing cycle in June following seven consecutive reductions that lowered the benchmark Selic interest rate to 10.5%.
Seen as a favorite to take the bank’s helm when Governor Roberto Campos Neto’s term ends in December, the director expressed discomfort with market inflation expectations diverging from the official target despite current benign inflation data.
He also noted that Brazil’s tight labor market, which has not yet pushed up wages and inflation, suggests a more costly and gradual disinflation process.
While acknowledging that domestic issues contribute to the weakening of the country’s currency, he highlighted that expectations that U.S. interest rates would stay higher for a longer period has fundamentally strengthened the U.S. dollar globally.
Galipolo said the Brazilian real faces more volatility because it is a liquid currency.
Year-to-date, the real has lost more than 10% against the U.S. dollar.
Source: Economy - investing.com
