Anika Begay
By Marcela Ayres
BRASILIA (Reuters) – Brazil’s central bank has pledged to lower the risk premium associated with uncertainties surrounding monetary policy, its president Roberto Campos Neto said on Friday, as he prepared the ground for an imminent leadership transition.
“The premium associated with that has come down a little bit,” he said at an event hosted by Barclays. “It’s a credibility game, we have to continue to demonstrate consistency.”
Campos Neto, whose term ends in December, stressed that all members of the bank’s board are sending the same message: the central bank is data-dependent and will not give any indication of future measures, but will do whatever is necessary to bring inflation back to target.
“If we need to raise rates, we will do it,” he said. “People are now realizing that no matter who is in charge of the central bank or who the directors are, the direction is set.”
In recent weeks, monetary policy director Gabriel Galipolo has made increasingly hawkish statements, which have helped strengthen the Brazilian real after a downward spiral against the U.S. dollar.
Sources told Reuters that Brazilian President Luiz Inacio Lula da Silva would soon name him as Campos Neto’s successor. Lula said on Friday he was not sure whether Galipolo would be his choice for the position.
Galipolo stressed that, in his opinion, the balance of inflationary risks is now asymmetric and skewed to the upside.
In the minutes of its latest rate decision, in which borrowing costs were held steady at 10.5% for the second time in a row, the central bank revealed that its board members now see more upside than downside risks to inflation, although there is no consensus on whether the balance is asymmetric.
Asked about his personal opinion, Campos Neto said he could not answer the question, noting that not all members’ opinions are made public.
He said the next inflation data was likely to be lower after the 12-month reading showed an increase to 4.5% in July, stressing that economic activity continues to surprise policymakers on the upside.
