In Brazil, the central bank deems its monetary policy more restrictive than usual in light of the planned interest rate hike, as conveyed by Nilton David, the monetary policy director. With a series of rate increases since September amounting to 275 basis points, reaching 13.25%, the bank has indicated an additional 100 basis point increase for March.
David noted the need for potential adjustments, emphasizing that decisions in May are not currently on the table. He emphasized that any rate cuts should not be tied to perceptions of economic slowdown but based on a clear evaluation of inflation drivers.
Acknowledging upcoming challenges with inflation expected to rise in the coming months, David expressed readiness to adapt policy accordingly, considering the real's recent gains against the U.S. dollar. He underscored the bank's approach not fixating on a specific exchange rate target and cautioned against hasty solutions for economic stimulus.
Anticipating a slowdown in economic activity, David highlighted differing views among economists regarding possible incentives to spur the economy but stressed that policymaking cannot be based on hypothetical scenarios. He echoed the sentiment that further tightening under current high rates may not be necessary, aligning with recent statements by central bank chief Gabriel Galipolo about the need for caution in pre-emptive actions.