Gabriel Galipolo, Brazil’s incoming central bank governor, reaffirmed on Wednesday that the 3% inflation target remains non-negotiable, though he highlighted multiple strategies to reach it. Currently serving as director of monetary policy, Galipolo will officially step into the governor role in January. He spoke at an event hosted by Bradesco Asset Management, emphasizing a flexible, data-driven approach.
Commitment to Flexible and Data-Based Policy Decisions
Galipolo noted that Brazil’s economy has shown resilience in recent months. He stressed that the central bank would evaluate economic data at each meeting, avoiding rigid reactions to market variables. Last week, the central bank raised interest rates by 50 basis points to 11.25%, accelerating its monetary tightening cycle as inflation pressures mount. In the meeting’s minutes, policymakers warned that worsening inflation expectations could extend this tightening phase.
Rising Inflation and Economic Challenges
Annual inflation in Brazil rose to 4.76% in October, driven by stronger-than-expected economic activity, a tight labor market, and a depreciated currency. Despite the recent rate hike, economists have revised their inflation projections through 2026, concerned about a weaker Brazilian real and fiscal uncertainty. The real’s recent decline is attributed to local fiscal challenges and a stronger U.S. dollar.
Galipolo on Market Expectations and Fiscal Measures
As markets anticipate new fiscal measures to support the real and reduce long-term interest rates, Galipolo acknowledged the pace of change, saying he values the “pains of democracy.” He noted that change often requires time, even when the market expects faster action.
Central Bank Intervenes in Forex Market
The central bank recently sold $4 billion in two dollar-denominated auctions, a response to seasonal year-end demand pressures on the exchange rate. Galipolo explained that the move was well understood and achieved its objective of stabilizing the exchange-rate market during a period of heightened demand.
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