MNI BRIEF: Fiscal, Monetary Policy Closely Linked-Campos Neto

Central Bank of Brazil Governor Roberto Campos Neto said on Tuesday government efforts to achieve fiscal targets have a "direct connection" with monetary policy.

"It is important for the government to try to pursue the fiscal target although it may be challenging. This is crucial because it has a direct connection to the decrease in interest rates and the interest rate process," Campos Neto told an event sponsored by communication agency Meio & Mensagem.

The governor reiterated inflation is declining overall, despite disappointing services sector data.

"Services inflation had decreased at an even faster pace than we anticipated, but it took a slight turn for the worse, and we’re trying to understand why,” he said, “But it is within the expected range in terms of convergence.” (See MNI INTERVIEW: No Acceleration Of Brazil Rate Cuts - Le Grazie)

Campos Neto added he was optimistic about economic growth, which might slightly exceed 2%, versus expectations of 1.6% in the central bank’s Focus survey of market estimates.