Brazil’s central bank head Roberto Campos Neto said Monday that the volume of concessional credit in the country had not grown to the point of having an impact on monetary policy.
“It has increased, but not enough to dramatically change the neutral rate,” he said, referring to the equilibrium rate that neither cools nor overheats the economy.
Speaking at an event hosted by Deutsche Bank in London, Campos Neto also noted that private debt securities benefiting from income tax exemptions have increased significantly, but similarly have no impact on monetary policy, as they do not they constitute a credit segment that is insensitive to the reference interest rate.
Campos Neto reiterated that Brazil needs to signal fiscal measures that can be seen as a positive shock to address premium risk in interest rate futures, which he said are currently affected by a lack of confidence in the sustainable management of public finances .
The central bank governor added that while he had not been informed of the measures, their impact would not mechanically alter monetary policy.
However, he noted that if perceived as a positive shock, they could potentially influence the long end of the yield curve, the exchange rate and inflation expectations.
“These variables are important because they are part of our reaction function,” he said.
Finance Minister Fernando Haddad said President Luiz Inacio Lula da Silva’s government will unveil measures to control mandatory spending after Sunday’s municipal elections.
Campos Neto also said inflation data in the country was mixed, underlining the need for policymakers to have time to analyze the data.
