Brazilian central bank president Roberto Campos Neto said on Wednesday that the balance of economic risks and increasingly benign inflation means there is scope to cut interest rates further.
In a presentation to lawmakers, Campos Neto warned, however, that risk premia and inflation could rise if the government’s economic reform process is derailed.
“The next steps of Brazil’s monetary policy will continue to depend on economic activity, the balance of risks and the projections and expectations related to inflation,” he said.
The central bank cut interest rates to a record low 6.00% last month and is widely expected to ease policy further in the coming months.
Campos Neto also defended central bank independence, noting it reduces economic instability in times of political transition.
“The cost of controlling inflation (loss of GDP) is lower the greater the autonomy of the central bank,” he said, adding that countries with more autonomous central banks have lower inflation and lower inflation volatility.