Central Bank head: Brazil solid amid uncertainties of global economy

Brazil’s Central Bank President Roberto Campos Neto said the country is fully capable of emerging from the uncertainties facing the global economy.

The international landscape is currently under turbulence, he said, but the Central Bank is not concerned, and one must look at the long run.

“We have a rather solid position, solid external conditions, a fairly large volume of reserves. We navigate through a crisis with no need to increase interest. Many countries had to, so I think Brazil is really solid in this connection. We’re at ease to navigate through this uncertain moment ahead of us,” said Campos Neto during an event in Brasília on the reduction of interest in the country on Tuesday (Aug 6).

Trade war

On Monday (5), China’s Trade Ministry reported that companies in the Asian country suspended the purchase of US agricultural goods. The move comes as a response to US President Trump’s announcement about new fees on Chinese imports. The commercial clash between the two nations makes an impact on the financial market in both Brazil and the world.

Campos Neto said this trade war saw a number of stages, with the first one having the world’s inflation expected to surge as a result of higher tariffs. However, this was not the case, he argued. On the contrary, there were a reduction in price indexes and revised estimates on the growth of the economy.

“When we look at Latin American countries, they have all revised their growth down, more or less as Brazil has. So this talk that Brazil revised growth because the government was frustrated, because the reforms didn’t make any strides… Actually, there was a major global driver. It’s hard to gauge [the role of the external component in the revision of the growth of the Brazilian economy]. Brazil is relatively closed, but the reality is, most of it was global,” he argued, adding that some countries continue to revise their forecasts on economic growth, while Brazil has ceased to do it.

Inflation

At the event, Neto also said that the possible thwarted expectations on the progress of overhauls and necessary adjustments in the Brazilian economy may affect risk assessment and raise inflation. However, he noted that the reforms are moving and the Central Bank expects them to continue making progress.

“The mother of reforms is the pension reform, but we hope they continue, we’re working with this scenario.”