Brazil central bank director reiterates upcoming 100 basis-point hike

By Marcela Ayres

(Reuters) -Brazil's central bank monetary policy director Nilton David said on Monday that the base scenario for policymakers is to proceed with an upcoming 100 basis-point interest rate hike, as the bank had previously indicated.

In his first public speech in the role, David stated that the level of confidence in the monetary tightening "must be slightly higher" amid beyond-normal uncertainties marked by tail risks seen in the international geopolitical scenario.

Speaking at an American Chamber of Commerce event, the director said the central bank aims to minimize risks to meet its 3% inflation target.

Consumer prices in Latin America's largest economy rose 4.56% in the 12 months to January, with policymakers projecting an acceleration to 5.2% this year, David noted.

"We raised rates by 100 basis points, and our base case is to continue at this pace due to forward guidance and also the need for a higher-than-usual safety margin amid uncertainty," he said.

In December, policymakers accelerated monetary tightening with a 100 basis-point rate hike and signaled two more increases of the same size in response to robust activity and a sharp depreciation of the country's currency.

The central bank followed the guidance in January, pushing interest rates to 13.25% and penciling in another 100 basis-point increase for March, but leaving further steps open.

Since then, economic data has supported a slowdown in activity, while the Brazilian real has strengthened some 8% against the U.S. dollar year-to-date, easing rate hike bets reflected in the yield curve, which in January had pointed to rates surpassing 16% later in 2025.

A central bank weekly survey with economists now projects rates peaking at 15.25% in June before edging down to 15% by year-end.

(Reporting by Marcela Ayres; Editing by Chizu Nomiyama)