BRASILIA (Reuters) - Brazilian central bank Governor Roberto Campos Neto ruled out an imminent interest rate cut by emphasizing that the country's benchmark rate for borrowing costs is appropriate for addressing current inflation concerns.
Speaking at a highly anticipated Senate Economic Affairs Committee hearing, he also said that policymakers need to ensure that inflation expectations are within the official targets, noting that expectations have been worsening for more than 14 weeks.
"Current interest rates are compatible with our type of problem," he said.
His remarks come amid frequent criticism from leftist President Luiz Inacio Lula da Silva and political allies on the bank's benchmark interest rates, which policymakers have kept steady at 13.75% since September.
The next rate-setting central bank meeting will be on May 2-3.
Campos Neto stated that the central bank adopts a "very technical position" to set interest rates.
Monetary easing has to be done "in the correct timing" and "with credibility" for the rate cut to be perpetuated in the yield curve, he said, adding that he does not know when interest rates will be reduced, as this "is a technical process that takes its time."
Also in contrast with Lula's stance, who has argued that the country is not experiencing inflation fueled by increased consumption, Campos Neto said there are demand-pull components in inflation and that core inflation is running "quite high" at 7.8%.
Inflation in the 12 months to March eased to 4.65%, but private economists expect it to reach 6.04% this year and 4.18% in 2024, exceeding official targets of 3.25% and 3.0%, respectively, according to a central bank weekly survey.
Campos Neto reiterated that the government's unveiling of long-awaited fiscal rules eliminated the possibility of a significant worsening in the public debt path. However, he reinforced that there is no automatic correlation between the new fiscal framework and decisions regarding monetary policy.