Brazil’s Central Bank has stopped its monetary tightening cycle rather than temporarily pausing it, monetary policy director Nilton David said, adding that interest rates remain at restrictive levels and policy is proceeding largely as planned, Reuters reported.
In late July, the bank kept its Selic benchmark rate at 15%, near a two-decade high, after seven consecutive increases since September last year totalling 450 basis points.
“It was not a pause. It was an interruption for us,” David said at a Porto-hosted event in São Paulo. He said the decision allows time to assess the impact of earlier moves before determining further action, in a context made more uncertain by new trade tariffs.
The bank has signalled since June that rates will likely be held for a “very prolonged” period. David said Latin America’s largest economy is running above potential, with sectors such as services and construction slower to feel the full effects of tightening.
He noted the stance was cautious even before the United States imposed 50% tariffs on Brazilian goods, adding that exporters to the US are “highly professional” and can adapt.
The real’s appreciation this year, he said, reflects lower risk premiums in local yields and confidence in the bank’s inflation target.
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