By Marcela Ayres
BRASILIA – Brazilian central bank chief Roberto Campos Neto said on Wednesday he was surprised by stubborn price pressures that had resulted in worse-than-expected inflation, while reaffirming the bank’s aim to bring inflation down to its target range.
The comments came amid growing market expectations that inflation next year could exceed the target of 3.5%, with a tolerance margin of 1.5 percentage points on either side.
“We have been surprised by how consistent some (price) shocks have been,” Campos Neto said at a conference sponsored by Bank of America.
“We have highlighted that our objective is to bring inflation to the target. And we also highlighted that the qualitative components of inflation have worsened much more than we expected,” he added.
In October the central bank raised interest rates by 150 basis points to 7.75% and signaled another such hike this year, stepping up the world’s most aggressive tightening cycle as inflation moves into double figures.
But some market experts have begun to think an even bigger rate hike might be necessary due to stubborn inflation and uncertainty around fiscal discipline.
Campos Neto said the central bank would continue to seek the right pace of raising interest rates, avoiding the mistakes of hiking them too fast or too slowly.
(Reporting by Marcela Ayres in Brasilia, writing by Tatiana Bautzer and Stephen Eisenhammer; Editing by Gareth Jones)
