Brazil’s central bank chief doesn’t rule out further rate hikes beyond June

BRASILIA, May 16 (Reuters) – Brazil’s Central Bank monetary policy director Bruno Serra said on Monday that policymakers were not ruling out further interest rate hikes beyond June, saying that “time will tell”.

The remarks come amid market talk of the need for an even tighter monetary tightening cycle at a time when inflation expectations continue to drift above official targets.

Earlier in May, the central bank raised interest rates by 100 basis points to 12.75% from a record low of 2% in March last year, signaling a more modest adjustment for next month. .

“We’ve put ourselves in a situation of signaling another upside as likely. From now on, time will tell,” Serra told a conference hosted by Goldman Sachs.

He admitted to preferring lower interest rate fluctuations, but acknowledged that this is not always possible.

“Preferring the scenario of interest rate stability over a longer period is one thing, but we are not tied to a specific scenario. We are tied to the pursuit of the center of the (inflation) target in the relevant horizon as we have done in recent years.”

Serra said keeping interest rates high for a longer period to keep inflation in check is better, when possible, than raising rates and then dropping them quickly.

After a recent depreciation of the Brazilian real, he indicated that the currency was mainly affected by the weakening of the yuan, but also by the US monetary tightening. Despite this, he added that the trend for the exchange rate is to behave “much better” than in 2020 and 2021.

Reporting by Marcela Ayres; Editing by Lisa Shumaker

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