At an event organized by the consulting firm APCE, the director of monetary policy of the Brazilian central bank, Gabriel Galipolo, presented facts according to which possible changes in monetary easing will not be correlated with interest rates at the end of the easing cycle.

He stated, “The manner in which the disinflation process unfolds and the rate of interest rate reduction, as well as possible indicators, will not mean a correlation with the terminal rate.”

Adopting a pace of reduction of 50 basis points in order to take advantage of all the advantages that are obvious and gain time was the goal. This goal is another prediction with the help of which the bank will see how things will unfold in the future.

With this move, the central bank started a cycle of interest rate cuts after a year of unchanged rates, which were at a six-year high of 13.75%, in order to fight inflation.

Gallipolo said that despite the reduction in the risk of inflation in the country compared to other advanced countries, the Brazilian exchange rate is performing well. Most countries are delaying the beginning of easing interest rates, adding, “With this closing of the differential, the exchange rate has remained at a good level.”

When asked about the exchange rate, Gallipolo replied that the variable exchange rate is an important line of defense for our economy.

The reason for this delay from the expected goals is the pre-cautiousness pointed out by the creators of the monetary policy, according to them there is no room for a drastic easing of inflation in the near future. Despite the fact that the situation is risky, Gallipoli said at one point that policymakers need to remove the use of the plurality in their guidelines for monetary easing. The current level of the reference interest rate in Brazil is 11.25%.

Therefore, any persistent de-anchoring of inflation greatly increases the costs of disinflation. This is a key goal for reducing inflation. In addition, this is the only way in which the fiscal framework will directly affect the balance of inflation and thereby meet inflationary expectations.