Brazil’s Campos Neto says markets perceive less monetary intervention by Reuters

By Howard Schneider

JACKSON HOLE, Wyoming (Reuters) – Brazil’s central bank chief Roberto Campos Neto said on Saturday that recent volatility may show the market is pricing in less fiscal and monetary intervention in the future.

Campos Neto, speaking at the Federal Reserve’s annual economic conference in Kansas City in Jackson Hole, Wyoming, said it will become harder to discuss monetary transmission without addressing fiscal issues.

Campos Neto, whose term ends in December, said the slowdown in China could impact Brazil through a terms-of-trade shock or lower import prices for Chinese goods, although the net effect would depend on how much is the slowdown.

Central bankers from around the world flew into Jackson Hole this week to attend what has become the world’s premier economic meeting, the annual symposium in Grand Teton National Park.

The Campos Neto panel talked about monetary transmission, or exactly how much effect interest rate fluctuations have on economic activity.

His remarks followed recent communication efforts by the Brazilian central bank’s rate-setters to stress that they remain united, considering all options for the upcoming policy decision on September 17-18, including a rate hike if necessary .

Campos Neto and other central bankers emphasized that there was no set direction for the future, a position they described as data-dependent.

In July, policymakers kept the benchmark Selic interest rate unchanged at 10.5% for the second time in a row, but tightened their rhetoric, citing the need for “even greater prudence” and “diligent monitoring of conditioning factors of inflation”.

Annual inflation reached 4.5% in July, further away from the official target of 3%, which has a tolerance band of 1.5 percentage points in either direction.

Interest rate futures are pricing in a more than 80% chance of a rate hike next month, which, if confirmed, would come as the US Fed prepares for monetary easing.