In an interview with Valor Econômico, Alberto Ramos, Goldman Sachs’ Director of Macroeconomic Research for Latin America, lauded the efforts of the Central Bank of Brazil (BC) in managing the nation’s economy.
He commended the Bank’s decision to maintain a higher Selic rate – a move previously criticized by Luiz Inácio Lula da Silva’s administration.
Ramos affirmed the BC’s strategy to gently manage inflation convergence rather than imposing a significant interest rate shock that could trigger a severe recession with considerable social and job market impact.
The BC’s chosen path was to employ a more restrictive monetary policy to ensure inflation convergence over 18 months.
He described this decision as “extremely reasonable” and necessary to maintain economic stability.
Ramos defended the Central Bank against critics, asserting that an aggressive interest rate hike of over 20% to reach the inflation target by year’s end would have been detrimental.
The Monetary Policy Committee decided to retain the 13.75% interest rate for the seventh time in a row in June, with the majority of the market predicting a reduction of 0.25 percentage point in the Selic rate, lowering it to 13.5% per annum.
Ramos revealed that Goldman Sachs had been betting on a rate reduction since last year.
He further noted that while Brazil’s Selic and real neutral rate may seem restrictive, other Latin American countries practice even tighter monetary policies.