Brazil's Central Bank chief Roberto Campos Neto admitted on Thursday that the January interest fixing rate policy meeting release may have generated more confusion in financial markets, instead of more transparency in communications.
Minutes of the January 19-20 meeting of the bank's rate-setting committee, 'Copom,' showed that some members said it should consider starting a process of partial normalization, reducing the extraordinary degree of monetary stimulus in the economy.
In an online webinar hosted by JP Morgan, Campos Neto noted that markets had mistakenly taken this to mean these members wanted to raise interest rates at that meeting, and not at the next meeting in March.
”If you had members that actually thought that we should have increased in January, they would have voted for that (before) and been very clear, Campos Neto said.
So for us, it was kind of implied that when we mentioned that, people would understand that as being March, not January. We understand that we could have been more clear about that, he said.
Copom kept its benchmark Selic rate at a record low 2.00% last month, but withdrew its 'forward guidance' pledge and some members signaled their preference to raise rates.
Against a backdrop of sticky inflation, markets reacted accordingly and began to price in a more aggressive rate-hiking cycle this year starting earlier than previously forecast.
Campos Neto said that was a clear example of how markets should not take transparency or dissent within Copom as an imminent policy signal, although he recognized that there was greater room for misunderstanding and confusion.
We always knew that there was a trade-off between being more transparent and giving confusing signs. When you plan to be more transparent in a more linear way, you can plan as linear as you want. But the perception won't be linear, he said.
The dissent was used as a sign of policy. We were very clear that that was not a sign,” Campos Neto added.
With information from Reuters