Brazil’s central bank governor Gabriel Galipolo stated on Monday that the bank’s monetary tightening cycle remains open, emphasizing the policymakers’ desire to retain their flexibility as they analyze incoming data and determine the suitable terminal interest rate.
Galipolo made these remarks at an event in Sao Paulo, clarifying that the bank is still in the process of discussing the rate hiking cycle. He stressed that their openness signifies the flexibility they wish to maintain during this period.
The central bank’s monetary policy committee is set to convene later this month to make its next rate decision. This follows the bank’s decision in May to increase the benchmark Selic rate by 50 basis points to 14.75%, marking its highest level in nearly 20 years.
In a change from previous strategy, policymakers last month omitted any forward guidance and the necessity for a more restrictive rate. Instead, they emphasized the importance of maintaining a restrictive stance for an extended period. This change was largely seen as an indication that the aggressive 425-basis-point tightening cycle might have concluded.
However, Galipolo suggested that while the central bank is determining the terminal interest rate, it is becoming increasingly clear that the model is considering the duration for which rates will stay at a contractionary level.
