Brazil to have new central bank head next year

The incoming government of Jair Bolsonaro has picked economist Roberto Campos Neto to become the new head of Brazil's central bank.

The decision was made public by Paulo Guedes, who will become finance minister on January 1 when Bolsonaro takes office.

Campos Neto's appointment has to be ratified by the senate, and the Bolsonaro confidant is expected to start his tenure in January, too.

Currently a high-ranking executive at Santander Brasil, Campos Neto will take over from sitting central bank governor Ilan Goldfajn. Local press reported that the highly respected Goldfajn could have stayed but declined the offer, citing mainly family reasons, according to financial daily Valor Econômico.

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"The move doesn't come as a big surprise – it had been suggested that Mr. Goldfajn might leave, and Mr. Campos Neto has been touted as a replacement for about a month," said Capital Economics in response to the news. "Mr. Campos Neto appears to be in a similar mould to the outgoing governor. He is currently an executive at Santander (Mr. Goldfajn joined from local bank Itau), and appears likely to adopt the same orthodox approach to monetary policy."

The key Selic interest rate is at a record low of 6.5% and after the Campos Neto appointment, Capital Economics confirmed its forecast that the Selic will reach 8.5% at the end of next year amid expectations that the Brazilian economy will gain strength in 2019.

"The main question facing the new governor is whether he pushes for full independence for the [central bank]," said the London-based research firm. "Full independence had been pushed by Mr. Goldfajn and is under discussion in congress."

Bolsonaro has pledged to respect the operational autonomy that the central bank currently enjoys.