By Howard Schneider
JACKSON HOLE, Wyoming (Reuters) – Brazil’s central bank chief Roberto Campos Neto said on Saturday that recent volatility may show that the market is pricing in less room for fiscal and monetary intervention in the future.
Speaking at the Federal Reserve’s annual economic conference in Kansas City, Jackson Hole, Wyoming, Campos Neto said it would be difficult to discuss cash transfers without addressing fiscal issues.
Campos Neto, whose term ends in December, said a slowdown in China could affect Brazil through a terms-of-trade shock or lower prices for imports of Chinese goods, although the net impact would depend on the magnitude of the slowdown.
Central bankers from around the world descended on Jackson Hole this week for what has become the world’s premier economic gathering, the annual symposium at Grand Teton National Park.
The seminar that Campos Neto spoke at discussed currency transmission, or specifically how interest rate movements affect economic activity.
His comments came on the heels of recent communication efforts by members of the Brazilian central bank’s interest rate-setting committee to stress that they remain united and are considering all options for the upcoming policy decision on September 17-18, including raising interest rates if necessary.
Campos Neto and other central bankers stressed that there was no specific guidance for the future, a position they described as data-dependent.
In July, policymakers kept the benchmark interest rate set by the Selec Bank unchanged at 10.5% for the second time in a row, but toughened their rhetoric, citing the need for “extra caution” and “close monitoring of inflationary drivers.”
Annual inflation reached 4.5% in July, further away from the official target of 3%, which has a tolerance of 1.5 percentage points in either direction.
Interest rate futures are indicating a greater than 80% chance of a rate hike next month, which if confirmed would come as the US Federal Reserve prepares to ease monetary policy.
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