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BCB’s Campos Neto Says Rate Hikes Not In Baseline Scenario

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  • Speaking after the publication of the June quarterly inflation report, BCB President Campos Neto said that rate hikes aren’t the base case for the BCB and that the central bank doesn’t want to give any guidance on next rate moves. He also reiterated that they will only intervene in the FX market amid market disfunction. On the new inflation targeting system, announced yesterday, Campos Neto said that this doesn’t mean there is any change in the way monetary policy is conducted.
  • Beyond that, he and BCB Director Diogo Guillen, who was also speaking, flagged the familiar concerns about rising inflation pressures and unanchored inflation expectations. Elsewhere, Finance Minister Haddad also highlighted the deterioration in the external environment as well as internal economic expectations, which he said was excessive.
  • Against this backdrop, USDBRL traded higher, breaching 5.53 to hit its highest level since Jan 2022. A break of this level would open the 5.60 handle. DI Swap rates also underperformed, with yields up by 10bp or more across much of the curve. Over the last month, yields in the belly of the curve have risen by around 70bp.
  • Looking ahead, attention now turns to May budget balance and net debt data, due tomorrow.
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  • Speaking after the publication of the June quarterly inflation report, BCB President Campos Neto said that rate hikes aren’t the base case for the BCB and that the central bank doesn’t want to give any guidance on next rate moves. He also reiterated that they will only intervene in the FX market amid market disfunction. On the new inflation targeting system, announced yesterday, Campos Neto said that this doesn’t mean there is any change in the way monetary policy is conducted.
  • Beyond that, he and BCB Director Diogo Guillen, who was also speaking, flagged the familiar concerns about rising inflation pressures and unanchored inflation expectations. Elsewhere, Finance Minister Haddad also highlighted the deterioration in the external environment as well as internal economic expectations, which he said was excessive.
  • Against this backdrop, USDBRL traded higher, breaching 5.53 to hit its highest level since Jan 2022. A break of this level would open the 5.60 handle. DI Swap rates also underperformed, with yields up by 10bp or more across much of the curve. Over the last month, yields in the belly of the curve have risen by around 70bp.
  • Looking ahead, attention now turns to May budget balance and net debt data, due tomorrow.