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Market disruption would take Brazil’s bull cycle to over 12.75%, central bank chief says By Reuters

By on March 25, 2022 0

© Reuters. FILE PHOTO: A man walks in front of the Central Bank headquarters in Brasilia, Brazil March 22, 2022. REUTERS/Adriano Machado

By Marcela Ayres

BRASILIA (Reuters) – The head of Brazil’s central bank, Roberto Campos Neto, said on Friday ongoing monetary tightening was likely to end with benchmark rates at 12.75% unless unexpected market disruptions alter the policymakers’ flight plan, which he considers unlikely.

Speaking at the centenary conference of the Central Reserve Bank of Peru, Campos Neto took a more direct stance after noting on Thursday that another interest rate hike in June was not the most likely scenario. likely.

Earlier this month, the central bank raised interest rates by 100 basis points to 11.75%, indicating another hike of the same magnitude in May to tame persistent double-digit inflation in the greater Latin American countries.

“We started the hike process a long time ago, we most likely think we’ll end up at 12.75%, which puts interest rates in a tight camp for Brazil,” he said.

According to Campos Neto, the door was left open for a possible rate adjustment in June on “very high uncertainty” about the extent of the crisis after Russia’s invasion of Ukraine, which caused inflationary pressures with a surge in commodity prices.

But he stressed that a reassessment of policy would only occur if the conflict escalated “a lot” or if an unforeseen market disruption generated a new wave of uncertainty.

“At the moment, we don’t think that’s the most likely outcome,” he added, pointing out that an inflation spike is already on the radar.

He said consumer price growth would peak in April, hitting 11% in the 12-month period by then.

Inflation over the 12 months to mid-March soared to 10.79%, official figures showed on Friday, beating market expectations and leading some analysts to change their forecasts for the coming months.

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