Brazil Central Bank Director Reiterates Upcoming 100 Basis-Point Hike

• Brazil's central bank monetary policy director Nilton David said on Monday that the base scenario for policymakers is to proceed with an upcoming 100 basis-point interest rate hike, as the bank had previously indicated.
• In his first public speech as director, David stated that the level of confidence in the monetary tightening "must be slightly higher" amid beyond-normal uncertainties marked by tail risks seen in the international geopolitical scenario.
• Speaking at an American Chamber of Commerce event, the director said the central bank aims to minimize risks to meet its 3.0% inflation target. Consumer prices in Latin America's largest economy rose 4.56% in the 12 months to January, with policymakers projecting an acceleration to 5.2% this year, David noted.
• In December, policymakers accelerated monetary tightening with a 100 basis-point rate hike and signaled two more increases of the same size in response to robust activity and a sharp depreciation of the country's currency.
• The central bank followed the guidance in January, pushing interest rates to 13.25% and penciling in another 100 basis-point increase for March, but leaving further steps open.
• Since then, economic data has supported a slowdown in activity, while the Brazilian real has strengthened some 8% against the U.S. dollar year-to-date, easing rate hike bets reflected in the yield curve, which in January had pointed to rates surpassing 16% later in 2025.
• A central bank weekly survey with economists now projects rates peaking at 15.25% in June before edging down to 15% by year-end.

(Source: Reuters)