Brazil's central bank will not provide forward guidance on monetary policy due to uncertainty from the Middle East conflict, said monetary policy director Nilton David on Tuesday.
After two consecutive 25-basis-point rate cuts to 14.50%, David stressed borrowing costs will remain restrictive until inflation converges to the official 3% target.
Headline inflation accelerated to 4.39% in the 12 months through April, driven by the U.S.-Israel war with Iran. David explained at a Santander event that the bank's decision reflects disrupted energy prices with no clear resolution.
'It will take time for energy prices to return, if they ever do. The central bank will not attack price changes from the conflict, but will not tolerate it becoming inflation,' he said.
The bank is troubled by inflation expectations drifting from target, especially at the 2028 horizon. The economy is not growing above potential, and policymakers seek serenity while assessing data.
On FX interventions, David stated the last actual intervention was in 2024 during a depreciation spiral. The real is a free-floating currency and the bank has no intention of interfering with its price.
