Brazil Will Continue With Its Interest Rate Instrument In The Future, Says Central Bank Director

• Brazilian central bank director Diogo Guillen ruled out that policymakers would give up interest rates as a policy instrument in the future, at a time when its aggressive cycle of monetary tightening is coming to an end. He stated that policymakers continue to have interest rates as a policy instrument, but will assess how to best use it in the future. 
• The statement followed a question about how the central bank would navigate an uncertain scenario without further monetary policy, following official communication that its strategy to combat inflation involves a higher terminal interest rate and keeping it at that level for longer. The central bank raised its benchmark Selic interest rate to 13.25% in June from a record low of 2% in March 2021, and has already penciled in another increase in August. 
• Without signaling precisely if this would be its final hike, policymakers also stressed the additional need to maintain rates "in significantly contractionary territory" for a longer period to bring 2023 inflation to around the 3.25% official target. Further, the strategy remains the same and the central bank has said it will "persevere" in this task until inflation expectations are "anchored." 
• Notably, while policymakers see 2023 inflation at 4%, private economists polled by a central bank's weekly survey forecast it at 5.13%. Guillen stated that the difference is due to the central bank's assumptions for oil, shocks in industrial goods, and a neutral interest rate.

(Source: Reuters & Nasdaq)