BRASILIA, March 30 (Reuters) – Brazil’s central bank policymakers view the oil price shock as a supply-side development that pushes inflation up while weighing on economic growth, but they are buying time to better assess the impact rather than rushing to adjust policy, Governor Gabriel Galipolo said on Monday.
“We try to discard or reduce the weight of extreme positions,” Galipolo said at an event hosted by Banco J. Safra.
The central bank cut its benchmark interest rate by 25 basis points to 14.75% at its March 17-18 meeting, after holding it at 15%, its highest level in nearly two decades, since last July.
Galipolo said that keeping interest rates steady for such an extended period, meant recent developments had not altered the broader context that allowed the easing cycle to begin earlier this month.
“At each point, there seems to be a view that the conflict (stemming from the U.S.-Israeli war against Iran) could intensify, with larger and more persistent effects from a supply shock,” he said.
At the same time, he noted that Brazil’s status as a net oil exporter puts the country in a relatively favorable position, as does its interest rate differential compared with peers.
Despite the start of the easing cycle, Brazil’s real interest rates remain above 10%, among the highest for major global economies.
Economists in the bank’s weekly survey, released earlier on Monday, now expect another 25-basis-point rate cut at the next meeting in late April, down from a previously expected 50-basis-point move.
(Reporting by Marcela Ayres; Editing by Alex Richardson and Susan Fenton)
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