(Adds market reaction, central bank statement, comments on policy autonomy in paragraphs 10-15)
By Jamie McGeever and Marcela Ayres
BRASILIA, Jan 22 (Reuters) - The global economic outlook has deteriorated and remains risky, but investor confidence in Brazil is justified by the reform agenda proposed by the new government, Central Bank Governor Ilan Goldfajn told Reuters on Tuesday.
President Jair Bolsonaro’s pledges to tackle corruption, overhaul the country’s pension system and privatize state firms should help support medium- to long-term growth despite the international challenges, Goldfajn said.
“The signs coming from the new government are encouraging,” he told Reuters in an interview at the Brazilian central bank in the capital Brasilia. “These are things that please investors.”
Goldfajn, in the final weeks of his term as central bank governor which began in June 2016, said the execution of Bolsonaro’s economic agenda, including pension reform, was key to keeping interest rates and inflation near current lows.
The central bank has been justified in keeping the benchmark Selic rate at an all-time low of 6.5 percent since March 2018, he said, despite the local currency’s slide last year.
“The central bank’s objective is inflation, not any particular asset price or exchange rate,” Goldfajn said.
“Monetary policy always has to be conducted with a calm perspective, cautiously, confidently, and with focus. We kept that serenity (last year) and we’re doing it now too,” he said.
Annual inflation is running at 3.75 percent, below the central bank’s target of 4.25 percent for this year.
“We believe monetary policy is stimulative. Whether it is sufficiently so, we will always look at the right moment,” he said.
Brazilian interest rate futures fell in afternoon trading, chalking up their biggest drop in three weeks, as some traders interpreted Goldfajn’s comments as being more dovish than market participants had expected.
“The central bank clarifies that the monetary policy message has not changed since the last (policy meeting) and it continues to prioritize caution, perseverance and serenity,” the bank’s press office told Reuters after markets closed.
Brazil’s currency and the benchmark Bovespa stock index both slipped more than 1 percent, their biggest daily drops this year, as concerns over U.S.-China trade relations added to worries about global growth.
Traders said Brazilian assets may have been primed for a correction after a surge of investor optimism around the new government.
Goldfajn is set to step down in March, when Bolsonaro’s choice to replace him, Roberto Campos Neto, a senior executive at Banco Santander Brasil SA, takes the reins at the helm of the central bank after being confirmed by Congress.
Goldfajn said he does not expect any political interference from the new government in central bank policy, contrasting the growing credibility of Brazil’s central bank with other emerging markets where politicians have weighed in on monetary policy.
Brazil’s Congress is considering a law to formalize the autonomy of the central bank, which Goldfajn said he hopes will be signed into law this year.
He also said pressure from U.S. President Donald Trump on the Federal Reserve was just “noise” and would have no impact on monetary policy in the United States. (Reporting by Jamie McGeever and Marcela Ayres; Editing by Brad Haynes and Bernadette Baum)