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2026-05-28 21:42:10
[Brazilian Central Bank Director: Monetary Policy More Effective Than a Year Ago, Household Debt Rising But Not Out of Control, Will Not Allow Iran Conflict to Transmit into Inflation] ⑴ Brazilian Central Bank's Director of Monetary Policy, Davide, stated that monetary policy is impacting household debt, which is one of the channels through which expectations are transmitted. Household debt is on the rise but not out of control, and the economy's sensitivity to monetary policy has increased. Current monetary policy is more effective than it was a year ago. ⑵ Short-term inflation expectations mainly reflect price changes and supply shocks, but they can also have ripple effects in subsequent years. The central bank is closely monitoring the de-anchoring of inflation expectations over a longer timeframe and will not allow higher expectations to translate into actual inflation, pursuing a 3% inflation target. ⑶ Regarding 2028 inflation, the central bank has all available tools, capabilities, and legal obligations to pursue its target. If 2028 expectations are impacted, it indicates that the market believes the central bank may not fulfill its inflation target, but the central bank will deliver on its promises. ⑷ The Brazilian Real has performed unusually over the past 12 months, appreciating with low volatility against the backdrop of Trump's tariff rhetoric and the Middle East conflict. A portion of GDP will grow due to the oil shock, but this growth will not translate into consumption; households will bear the shock costs, including fuel prices. After the easing cycle ends, the goal is to maintain restrictive interest rates to ensure inflation converges to the target level.
