BRASILIA (Reuters) – Brazil’s central bank governor reiterated on Monday that significant uncertainties made it difficult to provide guidance on monetary policy, indicating policymakers are no longer committed to a future 50 basis-point cut.
“Last week, we stated that we couldn’t provide guidance due to significant uncertainty,” said Roberto Campos Neto at an event hosted by Legend Investimentos.
He added that providing a range of possible scenarios was aimed at increasing transparency regarding policymakers’ intentions.
In March, the central bank revised its monetary policy guidance, anticipating a new 50 basis-point reduction at its next meeting in May and departing from its previous pattern of signaling same-size cuts for “upcoming meetings.”
But last week the central bank chief pointed to rising local and global uncertainties, leaving the door open to a slower pace of easing.
Speaking to investors in Washington, Campos Neto said, “we could have a reduction in the uncertainty, which means we take the usual path.”
“(But) we could have a system in which the uncertainty becomes and continues to be very high but doesn’t change significantly, which might mean a reduction in pace.”
A worst-case scenario, he added, would come if uncertainties happen to aggravate and create global stress, which could lead the Brazilian central bank to alter its base scenario.
Campos Neto refrained on Monday from indicating which scenario is currently the most likely, saying that this will be revealed at the next monetary policy meeting.
According to Campos Neto, heavy intervention in the exchange rate would shift risk entirely to the long-term interest rate curve, which would be undesirable.
The ideal intervention in the exchange rate is neither too small nor too large, but it is never aimed at altering macroeconomic fundamentals, he said.
(Reporting by Marcela Ayres; Editing by Andrea Ricci)
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