By Marcela Ayres
BRASILIA (Reuters) -Brazil’s central bank has provided no guidance for its upcoming policy meeting because of its need for flexibility at this time as it tries to bring inflation back toward its 3% target, Governor Roberto Campos Neto said on Wednesday.
Speaking at an event hosted by Santander (BME:), Campos Neto said central bank policymakers understand that the lack of clear signaling increases market volatility, but he emphasized that “we chose not to provide guidance precisely because we believe it is important to have flexibility at this moment.”
“The best way to maintain credibility is to conduct monetary policy based on a technical and well-communicated framework,” Campos Neto said.
Brazil’s central bank kept its Selic benchmark rate steady at 10.5% at its meeting in July for the second consecutive time. Its next policy meeting will take place on Sept. 17-18.
Campos Neto said the central bank will do whatever is necessary to bring inflation back down to the target, a message he highlighted as “very important.” Official data on Tuesday showed annual inflation in South America’s largest economy hit 4.35% in mid-August.
In a written presentation to the Santander event, the central bank chief said Brazil’s disinflation process had slowed while inflation expectations had further deviated from the official target recently.
He also emphasized that “services inflation, which has greater inertia, is playing a predominant role in the current stage of the disinflationary process” in the country.
Campos Neto added that there are early but clearer signs that a strong labor market may be pushing up prices in the service sector.