BRASILIA (Reuters) -Brazil’s benchmark interest rate of 15% is overly restrictive and there is room to reconsider the timing of monetary easing, Finance Minister Fernando Haddad said on Monday.
“The current level is more restrictive than necessary,” Haddad told BandNews TV. “There is room today to rethink the trajectory of the rate-cutting cycle.”
Policymakers paused their tightening cycle last week, keeping rates at their highest level in nearly two decades and signaling they will remain steady for a “very prolonged” period as the central bank seeks to bring inflation back to target.
Private economists surveyed weekly by Brazil’s central bank expect a first interest rate cut in March, according to the latest poll released on Monday.
Haddad said annual inflation “has everything in place” to fall below 5% by December.
The central bank forecasts inflation at 4.9% this year, above the official target of 3% with a tolerance band of 1.5 percentage points in either direction.
Haddad also emphasized that Brazil’s contingency plan for steeper U.S. tariffs, which has yet to be decided by President Luiz Inacio Lula da Silva, will have only a small impact on the country’s primary budget.
“At this moment, we are not considering any contingency measures that would breach the country’s fiscal framework,” Haddad said.
Brazil will have no difficulty redirecting beef and coffee exports to other markets after the U.S. imposed 50% tariffs on those products, said the minister.
But he noted that the broader impact of the levies on other sectors is a concern for the government, particularly for those producing customized goods for the U.S. market.
Haddad said government purchases could help support some affected sectors, such as fruits, but added that this would not apply across the board. He also pointed to subsidized credit lines as another potential form of support.
(Reporting by Marcela Ayres, Editing by Franklin Paul and Rosalba O’Brien)
