Central Bank President: Brazil’s Currency Most Affected by Exchange Rate Depreciation,

RIO DE JANEIRO, BRAZIL – Central Bank President Roberto Campos Neto, acknowledged on Monday, June 1st, that Brazil was the country that “suffered most” with the exchange rate depreciation in the crisis caused by the novel coronavirus. “We had improvement in the last week,” he added, during a virtual public hearing in Congress. In the wake of the crisis, Brazil has already recorded a 33.66 percent rise in the dollar against the real in 2020.

Campos Neto also pointed out that market agents believe that in the crisis, “the developed world is better equipped to fight the crisis than emerging countries”, he said.

The president of the Central Bank also noted that the financial markets are “monitoring the coronavirus contamination curve, either for the worse or for the better”.

Fluctuating

Campos Neto reinforced that the exchange rate is fluctuating in Brazil and that the institution intervenes when there is a liquidity gap.

Asked about the convenience of an inflation target lower than the current one – of 4.00 percent for 2020 and 3.75 percent for 2021 – Campos Neto recalled that the parameters are established by the National Monetary Council (CMN).

The Central Bank has one of the three votes in the CMN. “I do not think we should change the inflation target,” said Campos Neto, recalling that with the crisis caused by the pandemic, there was an inflation “deviation” from the target.

Not exhausted

The president of the Central Bank also stressed that monetary policy in Brazil “is not exhausted”. Currently, the SELIC (the basic Treasury interest rate) stands at 3.00 percent per year, its lowest level in history. Among economists and the Central Bank there are debates on how much the rate could still drop in this crisis period.

Campos Neto said that using “other tools” to counter the impact of Covid-19 on the economy will create “a distortion in our monetary policy principle”. “The system could lose credibility,” he said.

PIX

The Central Bank president also reiterated that the authority intends to launch, in November, an instant payment system called PIX. At another public hearing, he argued that the release of emergency aid to the low-income population, in the amount of R$600, was “quite fast when compared to other countries”.

Campos Neto also stated that the authority did not release all of the R$1.3 trillion to the banks. “That depends on the banks. We are monitoring this,” he said.

After two months, the Central Bank released only 21 percent of the more than R$1.2 trillion (US$246 billion) announced for financial institutions in March.

Campos Neto’s statements were made during a virtual public hearing of the Congressional Joint Committee aimed at monitoring the government’s economic measures during the novel coronavirus pandemic.

Source: InfoMoney