Brazil's central bank chief addressed market concerns regarding the bank's response to a potential economic slowdown, emphasizing that preemptive action could not be taken until such a scenario emerges. Speaking at a Fiesp-hosted event, Gabriel Galipolo highlighted the bank's recent proactive measures, including a 100-basis-point rate hike in January to 13.25%, with a similar increase anticipated at the upcoming March policy meeting.
Emphasizing the importance of adhering to the inflation-fighting mandate, Galipolo expressed the need for monetary tightening to achieve its desired impact. He underscored the necessity of ensuring that any response aligns with actual economic deceleration rather than short-term market fluctuations.
Addressing market uncertainty regarding potential stimulus measures in response to a slowdown, Galipolo distinguished between preemptive action in clearly accelerating or decelerating economic conditions, cautioning against reacting to speculative possibilities rather than concrete indicators. He warned against the risk of monetary policy preemptively responding to unsubstantiated threats, characterizing such action as a mistake.
Galipolo highlighted the positive market response to the postponed imposition of tariffs by U.S. President Donald Trump, which has provided relief and contributed to the appreciation of asset markets. He contrasted initial expectations of inflationary consequences and currency depreciation against the current strengthening of the Brazilian Real, which has rebounded nearly 8% since the beginning of the year after a substantial 2024 depreciation against the U.S. dollar.