Statements from the President of the Central Bank of Brazil on Credit and Financial Measures

Roberto Campos Neto, the President of the Central Bank of Brazil, addressed concerns regarding the growth of subsidized credit in the country today. Campos Neto stated that despite an increase, it has not reached a level that would significantly impact the country’s monetary policy or alter the neutral interest rate that balances economic growth without leading to overheating or cooling.

Speaking at an event organized by Deutsche Bank in London, Campos Neto emphasized the importance of the rise in private debt securities benefiting from income tax exemptions, but noted that this does not influence monetary policy decisions. This is due to the fact that these securities are not insensitive to changes in the benchmark interest rate.

Campos Neto also touched on the significance of fiscal measures in affecting market confidence and interest rate maturities. He indicated that he is not privy to the specifics of these measures, but if perceived positively, they could have the potential to influence the yield curve, exchange rates, and inflation expectations.

Finance Minister Fernando Haddad stated that the government of President Luiz Inacio Lula da Silva would unveil strategies for managing mandatory spending following the municipal elections held on Sunday. These measures are expected to have an impact on the country's fiscal outlook.

Campos Neto concluded his remarks by noting that Brazil's inflation data presents a mixed picture, underscoring that policymakers need time to analyze the information in depth.