Economy7 hours ago (Apr 08, 2021 04: 15PM ET)
By Jamie McGeever
BRASILIA (Reuters) – Brazil’s benchmark Selic interest rate is set to achieve its neutral degree next year, a central bank manager said on Thursday, including that policymakers’ baseline scenario is for a Selic of 3% in real terms, or 6%-6.5% in nominal terms.
In one of the first times a policymaker has offered specific estimates of the so-called neutral rate, economic policy director Fabio Kanczuk said current information and forecasts suggest it would be”very bizarre” for the Selic to reach its neutral level this year.
“If (we) raise the Selic rate in all the meetings, attaining the neutral rate, I receive inflation that’s too low in the appropriate horizon. So it seems like it’s too much tightening, so I need to go slower than this,” he said in an online event hosted by BNY Mellon (NYSE:-RRB-.
The neutral rate is the level of official borrowing costs at which the economy runs at full employment and potential growth without fueling inflation.
Assuming the bank’s current outlook for the economy and inflation pans out,”then you should reach the neutral rate when the output is near zero. So that ought to be in 2022, not in 2021, that is why you shouldn’t have complete normalization in 2021.”
The central bank increased the Selic in March for the first time in six years, to two. 75percent by a record low two. 00 percent, also said it would raise by an identical amount in May, barring any sudden consequences.
But with yearly inflation now above 5 percent and set to rise further in the coming months, so many investors are fretting that inflation will end the year above the central bank’s goal of 3. 75%. )
Kanczuk also stated that he doesn’t envisage the central bank for example more specific and transparent forecasts for the route of rates in its communications, such as some European financial authorities do.
Disclaimer: Fusion Media would like to remind you that the information contained in this website is not necessarily real-time nor true. All CFDs (stocks, indexes, futures) and Forex prices aren’t supplied by exchanges but instead by market makers, and so prices may not be true and might vary from the actual market cost, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a consequence of using this data.
Fusion Media or anybody involved with Fusion Media will not accept any liability for loss or damage because of reliance on the information such as information, quotes, charts and inputs signs contained within this site. Please be fully informed regarding the dangers and costs related to trading the financial markets, it’s one of the riskiest investment types potential.