BRASILIA (Reuters) – Brazil’s central bank economic policy director Diogo Guillen said on Thursday that when inflation expectations are unanchored, as they are now, interest rates need to be higher and also for a longer period.
Guillen and central bank chief Gabriel Galipolo stressed the bank’s data-dependent stance at a press conference following the release of its latest projection for consumer prices to approach the official 3% target only in the third quarter of 2027.
Last week, policymakers raised interest rates 100 basis points to 14.25% and signaled a smaller hike at their next policy meeting in May.
Galipolo said the central bank refrained from providing precise guidance on the size of the next rate increase to maintain flexibility in its decision-making. It conducts an intense data review for signs of economic cooling.
“There are still unanchored inflation expectations, current inflation running above target, and a series of challenges for the central bank to address. That’s why we have not ended the tightening cycle,” Galipolo said.
“A range of indicators will determine whether the dosage of the remedy is appropriate.”
He noted that Brazil is moving into a level of monetary tightening “with some security,” even for those who project a higher neutral interest rate.
(Reporting by Marcela Ayres; Editing by Richard Chang)
