He Central Bank of Brazil stressed this Tuesday that its decisions on monetary policy are not directly influenced by those made by the United States Federal Reserve (Fed)after both entities announced opposite paths on interest rates on the same day.
In the minutes of the meeting held on January 30 and 31, in which the Central Bank of Brazil cut the benchmark interest rate by 50 basis points, to 11.25%, the authorities stated that the cuts of the same size that they had already indicated for the next meetings were considered “appropriate to maintain the contractionary monetary policy necessary for the process disinflationary“.
On the same day of the monetary policy decision of Brazil from last week, the Fed kept rates stable and the president Jerome Powell stressed that “the inflation is still too high,” dealing a blow to investors who expected cuts in the United States as early as March.
The Brazilian central bank highlighted the continued international volatility, citing renewed geopolitical tensions and debates over the start of monetary policy easing in major economies. “There is no mechanical relationship between the conduct of US monetary policy and the determination of the domestic policy interest rate,” she added.
Although it stressed that disinflationary dynamics did not diverge significantly from what it expected, the central bank pointed out aspects that require “further investigation.”
He Central Bank of Brazil highlighted the importance of evaluating the production gap and the behavior of the labor market to determine the pace at which inflation will reach the target.
“A more tense labor market, with salary adjustments above the inflation target, could slow down the convergence of inflation, notably affecting inflation in services and in the most labor-intensive sectors,” he noted.
Simultaneously, policymakers recognized that a positive recovery in relative prices, favorable prospects for raw materials or lower inflation in services could accelerate the disinflationary process.
Source: Ambito
