Brazil's central bank director stresses risk of increased inflation expectations

BRASILIA, March 28 (Reuters) -

Brazilian central bank director Diogo Guillen stressed on Tuesday the risks of distancing inflation expectations from official targets, as policymakers have indicated there was no room for monetary easing in the near future.

Speaking at an event hosted by Goldman Sachs (GS), Guillen, the economic policy director, said a more persistent or longer-lasting de-anchoring "greatly increases the cost of disinflation," and this is an crucial point considering the central bank remains committed to achieving inflation goals.

Guillen also said the main channel through which the government's awaited fiscal framework will affect the balance of risks for inflation is precisely via inflation expectations.

"This is the channel that we consider to be the most important to have an effect on disinflation," he said.

In

minutes

of the March 21-22 meeting, when the rate-setting committee Copom kept the benchmark rate at 13.75%, the central bank had stated that current monetary policy requires "serenity and patience." It indicated that worsening inflation expectations justified its decision to maintain a hawkish stance.

Amid fears about the credit slowdown in Brazil, Guillen stated that the movement is expected and is part of the process of conducting monetary policy throughout this year.

Attention is being paid to verifying whether there is a greater deceleration than is compatible with the scenario of higher borrowing costs, he said, noting that the central bank has instruments linked to macroprudential policy to address frictions in the system should they occur. (Reporting by Marcela Ayres; Editing by David Gregorio)