MNI BRIEF: Selic Restrictive Even With Higher Neutral -BCB Gov

Central Bank of Brazil Governor Gabriel Galipolo said Thursday that the reason the board mentioned policy lags in the minutes of its last meeting was to communicate how the transmission mechanism works and emphasized the interest rate is contractionary even assuming a higher neutral level.

“We talk about lags mainly to explain the transmission mechanism we expect, given that we’ve just delivered a 300-basis-point hike and reached a level that is contractionary even if we assume a higher neutral interest rate,” he said at the Monetary Policy Report press conference in Brasilia.

The lag is already included into the inflation forecasts, he said in response to a question from MNI.

The BCB’s Copom committee raised its Selic rate by another 100 basis points this month to 14.25%, while signaling a smaller increase at its next meeting in May. (See MNI INTERVIEW: BCB Might Cut Sooner as Activity Slows - Serra)