Campos Neto says interest rates could be reduced at the next BC meetings

The president of the Central Bank, Roberto Campos Neto, said this Tuesday (21) that the monetary authority may make two more cuts of 0.50 percentage points in the basic interest rate in the next two meetings of the Monetary Policy Council (Copom). The cycle of Selic cuts began in August after intense and continued criticism from President Luiz Inácio Lula da Silva (PT) and government members and allies.

According to Campos Neto, although inflation is still slightly above the target, long-term expectations point to a reduction. And this, he says, opens up space for Copom to continue cutting interest rates.

“The fees [de juros] are so restrictive in Brazil that we can continue with the reduction process, because with inflation falling, real interest rates rise and there is room to cut interest rates and continue in the restrictive field”, he said in an interview with BloombergTV.

Since the first cut in the Selic, the interest rate went from 13.75% to 12.25%, also with two reductions of 0.50 percentage points. After the next meetings, Campos Neto says that the following decisions will depend on many factors, such as “an international scenario that indicates a lot of concern, there are geopolitical problems, there are uncertainties regarding oil prices”.

“But when we observe how emerging markets have reacted and Brazil has reacted, this puts us in a positive feeling”, he highlighted.

According to him, the Real is performing well against the Dollar due to an improvement in Brazil’s credibility, highlighting the cycle adopted to contain inflation. And he attributed the currency’s improvement to the significant inflow of capital and the strong performance of agricultural exports.

However, Roberto Campos Neto warned that the Central Bank may take action again if there is any perception of lack of fiscal control. For now, he says, the country is in a good fiscal situation and awaits the vote on pending measures in Congress.

The much-discussed autonomy of the Central Bank, approved by law and also criticized by Lula, was cited by the president of the monetary authority making a comparison with what happened in Argentina – which was one of the factors that led the country to a serious economic crisis.

Campos Neto pointed out the loss of strength in autonomy with frequent changes in fiscal and monetary targets, which led to a loss of credibility and an inflationary spiral.

“We can only hope that, with a new government, Argentina will be able to turn things around. It is very important for Brazil that Argentina works towards balance because it is a very important trading partner,” she added.