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Interest rates will keep stimulating economy, central banker says

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Central Bank President Roberto Campos Neto said Tuesday it would take "a very different scenario" for the monetary authority to raise the Selic, Brazil's benchmark interest rate, to a level that does not stimulate the economy.

In March, the Central Bank's Monetary Policy Committee (Copom) raised the Selic to 2.75% a year from 2% a year and signaled another 75 basis points hike in May, starting what it called a "partial normalization" of the rate. In other words: despite the hikes, the Selic will continue at a level that stimulates economic activity.

According to Mr. Campos Neto, for there to be "full normalization" of monetary policy, major changes are needed in three factors: the opening of the economy the Central Bank foresees in the second half; a rise in commodities prices in reais, affecting inflation; and the risk premium linked to the fiscal situation, which impacts the long part of the yield curve.

"These elements would have to change a lot for us to do something different," he said when asked about what would be necessary for a full normalization, in a virtual event organized by bank Itaú.

Mr. Campos Neto recalled that the Central Bank has been improving transparency of monetary policy decisions by...

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