BRASILIA, May 13 (Reuters) - Brazil’s recent interest-rate hikes were “sizable” and will help lower inflation, Central Bank Director Luiz Awazu Pereira said on Tuesday, reinforcing signs that policymakers will hold rates where they are this month.
“We took early and sizeable action on monetary policy to address domestic inflationary pressure, complemented by fiscal policy,” Pereira said in English at an event in Paris, according to a transcript on the central bank’s website.
“At this moment, there are renewed domestic food price shocks, but they are beginning to subside, which has helped to begin reducing current inflation expectations,” he said. “In any event, we are operating in a much tighter monetary conditions environment.”
Brazil’s central bank has raised its benchmark Selic rate 375 basis points since April of last year and it now stands at 11 percent. Yields on interest-rate futures suggest most traders are betting that the bank will keep the Selic rate on hold at its next policy meeting May 27-28.
Pereira also said that Brazil needs to boost productivity to accelerate economic growth, a goal that can be achieved through investment in roads, ports and other infrastructure.
“There are a number of ‘low hanging fruits’ available in Brazil,” Pereira said. “The potential for productivity increases due to higher returns to investment in human and physical capital and/or from simplifying business, tax procedures, management practices, are very high.”
Reporting by Silvio Cascione; Editing by David Gregorio