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President of the Central Bank of Brazil rules out hike in June

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(Bloomberg) — The president of Brazil’s central bank downplayed the odds of a further interest rate hike in June, resulting in swap rates plummeting as investors downplayed the chances of a tightening cycle. longer monetary period.

It is appropriate to point to a rate hike of 100 basis points in the next decision in May, Roberto Campos Neto told reporters on Thursday. As for the next meeting in June, a new rise then “is not the most likely scenario, as we indicated in the minutes of the last meeting. But we are facing a very volatile outlook and we need to consider different possibilities.”

Monetary policymakers led by Campos Neto are nearing the end of one of the most aggressive tightening cycles in the world in the wake of the pandemic. The bank’s board has already raised the rate by 975 basis points in a year to combat inflation pressured by food and fuel. Many private sector economists said this week that an additional boost was sent after May to rein in expectations.

“We look at what we consider to be the pace, the proper pace and the terminal rate,” Campos Neto said. “We understand that the most appropriate thing was to raise the rate by 100 basis points and then target 100 more in May.”

Interest rate swap contracts due in January 2023, which indicate expectations about monetary policy at the end of the year, fell as much as 16.5 basis points after the comments. The real was unchanged at 4.8246 per dollar.

The central bank’s inflation projection in the reference scenario stands at 7.1% for this year and 3.4% in 2023, according to the quarterly inflation report published on Thursday. By comparison, policymakers are targeting consumer prices at 3.5% this year and 3.25% next.

Last week, central bankers also introduced an “alternative scenario” for inflation, which they now see as more likely, in which oil prices rise to $100 a barrel in December. In this perspective, the value of valuable goods as consumers is projected at 6.3% in 2022 and 3.1% in 2023.

original note:

Brazil Central Bank President Throws Cold Water on Key June Rate Hike

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