MNI BRIEF: BCB Rate Hikes Starting To Affect Activity- Guillen

Central Bank of Brazil Deputy Governor for Economic Policy Diogo Guillen said Monday the board does not see monetary policy losing strength, suggesting rate hikes from 10.5% to 15% over the last year are starting to affect activity but the board is still assessing whether this is the adequate level to re-anchor inflation expectations.

"Monetary policy is working through different channels — credit, income, exchange rates — whatever the channel, you're starting to see its effects," Guillen stressed at an event sponsored by Warren.

"From the Central Bank's perspective, there has been no change in our understanding of how monetary policy operates, its quantitative impact, or its overall effects," he added.

He emphasized unanchored inflation expectations require keeping restrictive monetary policy for longer. 

"At the last meeting, we opted to maintain the interruption in the cycle, meaning we are still assessing whether the current interest rate is appropriate to bring inflation down to the target. Once this rate is confirmed, it will remain unchanged for a considerable time." (See MNI INTERVIEW: BCB Hold Until 2026, Early Cut Possible -Kfoury)