Brazil's central bank sees increase in uncertainty

Monday, June 19, 2017

Brazil's central bank head said that uncertainty has increased in the light of political turbulence, but economic reforms remain the main focus.

"We can have reforms and adjustments moving forward, and that's all I'm interested in, from the Central Bank's point of view. The uncertainty in recent weeks has increased. But it is likely to decline, I think we will see some reforms moving forward," said Ilan Goldfajn (pictured), in an interview for O Estado de S. Paulo newspaper.

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Analysts and investors have been concerned in recent weeks with the ability of President Michel Temer to advance approval of reforms, mainly pension reforms, amid political turmoil.

Regarding the benchmark Selic interest rate, the central bank head underscored that further reductions are likely to take place.

"The path for disinflation and the reduction of interest rates is a given. There is a process and I can't see radical changes that can affect it at this time. It is a given. The discussion, of course, is about rate and scope. What I want to communicate is that this will depend on the development of both, reforms and adjustments as well as inflation and activity. We'll keep looking." said Goldfajn.

Since October 2016, central bank reduced Selic base rate by a total of 400 basis points to the current level of 10.25%, as inflation remains below the monetary authority target.

The next central bank rate decision will take place on July 26.