Brazil's central bank is not cornered into raising interest rates, says director Galipolo

By Marcela Ayres

(Reuters) - Brazil's central bank director of monetary policy Gabriel Galipolo disagrees with those who interpret his recent statements as suggesting the central bank is cornered into raising interest rates, he said on Thursday.

Speaking at an event in Sao Paulo, he reiterated that policymakers are data-dependent and have all options on the table.

Galipolo argued the market has realized that the Brazilian central bank has more freedom for its next monetary policy decision on Sept. 17 to 18, after policymakers dispelled a perception this month that raising interest rates might not be possible.

"A difficult position for the central bank is not having to raise interest rates. The difficult position for the central bank is dealing with inflation outside the target," he said.

"Inflation outside the target is an uncomfortable situation. Raising interest rates is a routine part of fulfilling the central bank's role."

Galipolo said that his recent statements were unchanged from previous statements and were strictly aligned with what the central bank had already made public.

His remarks echo recent communication efforts of the bank's rate-setting committee members to emphasize what was in the minutes of its latest rate decision, when borrowing costs were held steady at 10.5%, after Galipolo was initially seen as more hawkish.

Earlier on Thursday, the bank's director of economic policy, Diogo Guillen, emphasized that the central bank's balance of risks should not be seen as guiding monetary policy.

In the minutes, the central bank had said this month that its board now sees more upside than downside risks to inflation, though there was no consensus on whether the balance was "asymmetric".

Speaking at an event in Rio de Janeiro, Guillen said there had been "an overemphasis on the balance of risks as a guidance tool," adding that it should not be interpreted that way.

Galipolo, widely seen as the likely successor to Governor Roberto Campos Neto, whose term ends in December, stressed this month that he was among those who viewed the balance of risks as asymmetric.

As this language is often seen as laying the groundwork for rate hikes, his comments fueled more hawkish bets on a monetary tightening cycle starting next month and going forward into early 2025.

Galipolo reiterated on Thursday that it would be wrong to establish a correlation between an asymmetric risk balance and potential policy guidance.

Campos Neto has refrained from disclosing which group he belonged to in the assessment of the balance of risks in recent comments, which tempered more hawkish bets that had been driving interest rate futures.

(Reporting by Marcela Ayres; Editing by Gabriel Araujo, William Maclean and Josie Kao)