MNI BRIEF: BCB Needs To Stay Very Restrictive - David

The Central Bank of Brazil is maintaining a very restrictive monetary policy stance, and unanchored expectations are a point of concern for all board members, BCB Deputy Governor Nilton David said Wednesday.

He noted there is still uncertainty about the pace of the economy’s deceleration. "We’ll only have full conviction by the last quarter of this year. In the meantime, there’s a real chance that what we’re seeing is just noise. That’s one of the reasons why the Copom decided to adopt a stance we understand to be very restrictive in terms of monetary policy," David said at an event hosted by FGV in São Paulo.

"Inflation expectations have been unanchored for some time, which is something that bothers everyone at Copom, not only because they are inputs for our models, but also because they genuinely reflect meaningful signals that we take very seriously," he added.

In this context, the Monetary Policy Committee (Copom) concluded "in an absolutely unanimous way" that the interest rate needs to "remain at a more restrictive level than it would be if expectations were anchored, and for longer than it would otherwise," he said. (See: MNI INTERVIEW: Lack Of BCB Guidance Doesn't Mean End Of Cycle)