(Reuters) -Brazil’s central bank signaled a “very prolonged” pause in its interest rate-hiking cycle because policymakers need more time to assess whether data are moving in the desired direction, a senior official said on Wednesday.
The bank’s monetary policy director, Nilton David, stressed that the decision to halt the tightening cycle reflects the need to wait for signs that excess economic growth beyond potential has been absorbed, allowing inflationary pressures to ease.
“We do believe the length of time (rates remain unchanged) has an effect,” he told an event hosted by Citi.
David added that the process inevitably involves a slowdown in Latin America’s largest economy, which has been consistently surprising to the upside for four years.
“We are absolutely convinced that monetary policy works,” he said. “It’s only a matter of time and things will converge.”
The central bank raised its benchmark interest rate by 25 basis points last month to a near two-decade high of 15% and signaled it would pause tightening at its next policy meeting in July.
Since September, cumulative hikes have totaled 450 basis points in an effort to tame annual inflation, which has been long running above 5%, exceeding the 3% target.
(Reporting by Marcela Ayres; Editing by Gabriel Araujo)
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