Brazil Now Experiencing its “Worst Moment”, But Growth Will Come, Says Central Bank Chief

RIO DE JANEIRO, BRAZIL – Roberto Campos Neto, president of the Central Bank, said on Thursday, September 5th, that the Brazilian economy’s growth is “below what we would like”. “We are going through the worst moment. We will begin to grow in the second half of the year, most likely in the fourth quarter,” he said, during an event in Brasília.

Campos Neto also said that there has been a downward revision of growth in the world’s main economies. “The yield curves are pricing declining interest rates in all economies and this has been exacerbated in recent weeks,” he said.

On inflation, he reaffirmed that it is under control in Brazil, “quite anchored in the short, medium and long term”. He recalled that, in the middle of this year, the National Monetary Council (CMN) announced its inflation target for 2022 at 3.5 percent, with a tolerance margin of 1.5 percentage points.

According to Campos Neto, financial market estimates took only a week to converge to this target, which shows confidence in the Central Bank’s work.

When discussing monetary policy, Campos Neto reiterated the idea included in the Central Bank’s recent announcements: that the institution has made room for an additional drop in the Selic (the basic interest rate), currently at six percent per year.

Close Monitoring of Currency Exchange Market

During his presentation, while quickly addressing the exchange market, Campos Neto also pointed out that the current strategy revolves around how much the Central Bank has as its net exchange position.

In recent weeks, amid the auctions of dollar spot sales in the market, the Central Bank has reaffirmed that the operations do not affect the net foreign exchange position, despite changing the level of international reserves.

On Wednesday, data released by the Central Bank showed that the institution’s net foreign exchange position reached US$329.951 billion. This position reflects what is available for the Central Bank to do in the face of some need for foreign currency – such as providing liquidity to the market in times of crisis, for instance.

The position considers international reserves, the stock of Central Bank line operations (sale of dollars with repurchase commitment), the institution’s position in foreign exchange swaps and Brazil’s Special Drawing Rights (SDRs) in the International Monetary Fund (IMF).

The president of the Central Bank attended on Thursday morning the conference “Brazil’s Agenda for Economic Growth and Development”, promoted by the Council of the Americas (COA).

After this Thursday’s event, Campos Neto was urged by journalists to speak specifically about the exchange rate, but the president left without giving an interview.