Brazil not ruling out rate hikes despite disinflation hopes -source

miércoles 3 de febrero de 2016 12:53 GYT

By Alonso Soto and Silvio Cascione

BRASILIA Feb 3 (Reuters) - Brazilian policymakers have not ruled out hiking interest rates in coming meetings even as a gloomier global economy raises hope that double-digit inflation will drop sharply this year, a senior government official told Reuters on Wednesday.

The Brazilian central bank surprised markets by keeping its Selic rate on hold at 14.25 percent at its last meeting after signaling tighter monetary policy to curb 12-year high inflation.

Some market economists and even members of President Dilma Rousseff's administration have said that there is room for rate cuts at the end of the year to ease the pain of a crippling recession.

The senior official, who is knowledgeable about economic policy, said inflation expectations need to drop near the 4.5 percent target center before officials consider cutting rates. However, in recent weeks, inflation forecasts have increased.

He said that central bank policymakers, including governor Alexandre Tombini, stood ready to increase interest rates further, if inflationary pressures picked up.

"Tombini and everybody have been pretty clear that if they need to hike rates again they will," said the official, who requested anonymity to speak freely. "No one said that necessarily the next step in rates will be to cut."

Unlike its peers in Mexico and Chile, the Brazilian central bank does not enjoy complete independence. Other government officials have told Reuters that the administration is worried more rate hikes will hamper its plans to revive the economy.

Rousseff, a leftist economist, said last month that while the central bank has autonomy to make its decisions, it is still accountable to the rest of the government.   Continuación...