BRASILIA (Reuters) -Brazil’s central bank chief Roberto Campos Neto said on Wednesday that the monetary authority is committed to pursuing its 3% inflation target, and that its policy discussions should “not even mention” the center and band of that goal.
Speaking at an event hosted by the central bank, he stressed that the authority “will not shy away from its commitment to achieving the inflation target and understands the fundamental role of expectations in inflation dynamics.”
“Our mandate is clear and well-defined, and it will be pursued,” Campos Neto added.
His remarks add to the hawkish tone of the minutes from the bank’s latest decision on Tuesday, which have fueled increased bets on a pause in the easing cycle that could occur as soon as the next monetary policy meeting in June.
In last week’s split monetary policy decision, policymakers cut interest rates by 25 basis points to 10.50% after six consecutive cuts twice that size.
Before the move, Campos Neto said, the central bank discussed the “extreme relevance” of inflation expectations
He stressed the acknowledgment of a deteriorating trend noted in both implicit expectations embedded in market prices and those gathered in a weekly survey of economists, which had remained stagnant for months but started to rise.
Citing factors such as expectations of higher U.S. interest rates, the strength of the labor market in Brazil and its implications for service inflation, less benign food inflation risk, and uncertainties about oil prices, Campos Neto justified adopting a smaller rate cut.
The decision stemmed from a tight division, with all four nominees appointed by President Luiz Inacio Lula da Silva to the nine-member board voting for a larger 50-basis-point, adhering to a March guidance.
However, dissenters sided with the majority in the belief that current conditions demanded a more cautious and restrictive approach, impeding any signaling on future steps.
(Reporting by Marcela Ayres; editing by Gabriel Araujo)