BRASILIA, Feb 9 (Reuters) – Brazil’s central bank chief, Gabriel Galipolo, said policy “calibration” was the key on Monday, stressing a data-dependent stance at this stage of the monetary policy cycle after policymakers signaled they were likely to begin easing in March.
Galipolo said it must be acknowledged that the inflation outlook had improved.
He cautioned, however, that, despite interest rates standing at a restrictive 15%, labor market data have surprised policymakers and the economy has proved more resilient than previously expected under such tight financial conditions.
“This is not a victory lap, because we still have data showing economic resilience. That is why we are talking about an adjustment,” he said at an event in Sao Paulo hosted by the banking association ABBC.
Galipolo said it was important to reinforce this message to avoid the perception that the central bank was targeting a specific level for real interest rates. “That is not the case. We will continue to monitor the data,” he said, adding that this was how an easing cycle begins.
The bank flagged it would start cutting rates at its next policy meeting in March, but stressed “serenity” regarding the pace and the magnitude of the easing cycle while reiterating that monetary policy must remain restrictive.
Galipolo also said the central bank remains concerned about inflation expectations running above the 3% target, particularly a persistent 50-basis-point “unanchoring” – exceeding the target rate – for longer horizons.
Economists surveyed weekly by the central bank have for several weeks kept their inflation forecasts for 2028 and 2029 unchanged at 3.5%, even as they have revised down near-term projections, which nonetheless remain above the target.
The central bank delivered an aggressive 450 basis-point tightening cycle to rein in inflation toward the official goal, pausing in July and leaving interest rates at current levels, the highest in nearly 20 years.
(Reporting by Marcela Ayres; Editing by Alex Richardson and Kevin Liffey)
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