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BCB Chief Reassures Markets Over Inflation Targets

BRAZIL
  • Local assets may extend their short-term relief rally following central bank President Roberto Campos Neto denied any intention to increase the BCB’s inflation target.
  • Additionally, Campos Neto attempted to ease the friction with the government in an interview on TV, released on Monday. He used a conciliatory tone with the government, which included an appreciation of President Luiz Inacio Lula da Silva’s social concerns and several compliments to Finance Minister Fernando Haddad.
  • Campos Neto made clear that the bank is not considering loosening its inflation goals adding that such a move would likely backfire, boosting inflation expectations, which might require an even higher benchmark rate.
  • On the downside for USDBRL, initial support to watch lies at 5.1338, the Feb 7 low. A break of this support would signal scope for a return to 4.9410, the Feb 2 low.

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