BRASILIA (Reuters) -Brazil's central bank chief Gabriel Galipolo emphasized on Wednesday the need to keep interest rates at a restrictive level, citing a slow convergence of inflation expectations toward the official target.
Speaking at an event in Sao Paulo hosted by vehicle distributor group Fenabrave, Galipolo said policymakers have consistently signaled that the benchmark Selic rate, currently at 15%, should remain unchanged for an extended period.
"Expectations and projections from both the central
bank and the market (are) still converging slowly toward the inflation target … that is what has required a more restrictive monetary policy," he said.
His remarks came after a weekly central bank survey of economists showed a first decline in inflation expectations for 2027, which had been stuck for six months.
Inflation expectations for this year and next had already been falling in recent weeks, helped by a stronger local currency amid a global weakening of the U.S. dollar.
Even so, market forecasts remain well above the official 3% target, standing at 4.86% for this year, 4.33% for next year and 3.97% in 2027 - a point Galipolo highlighted on Wednesday.
The central bank last month held its benchmark Selic rate steady after a 450 basis-point tightening cycle kicked off in September.
Galipolo said that even with interest rates at 15%, Brazil's labor market continues to show strong resilience. "And that is probably what is driving, in some cases, stronger demand," he added.
(Reporting by Marcela Ayres; Editing by Leslie Adler and Diane Craft)
