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"Maintaining the (fiscal) target is super-important," said
central bank chief Roberto Campos Neto at an event hosted by
business group Lide in Washington.
On Thursday, President Luiz Inacio Lula da Silva's
administration submitted a bill to lawmakers envisioning a
balanced budget next year.
Market participants surveyed by the central bank currently
anticipate a 2024 primary deficit equivalent to 0.8% of Gross
Domestic Product, but Campos Neto said the provisions should
improve as the government's revenue-enhancing measures gain
approval in Congress.
"We need this fiscal convergence to achieve a healthier monetary
convergence, which means lower interest rates for a longer
period," he said.
Echoing the same sentiment, monetary policy director Gabriel
Galipolo said during an event hosted by brokerage XP in Sao
Paulo that fiscal improvement in the country is "relevant" for
bringing inflation expectations closer to official targets.
Lula's new fiscal rules constrain expense growth to a percentage
of the revenue increase, he noted, so that if revenues fall
short, expenditures will also be limited.
The central bank kicked off an easing cycle in August with a
50-basis-point reduction, lowering its benchmark interest rate
to 13.35%, after keeping it unchanged for nearly a year in an
effort to curb inflation.
The divided decision, with part of the bank board supporting a
smaller cut, is less significant than it may appear, Galipolo
said, noting that policymakers were unanimous on maintaining
future reductions at 50 basis points in upcoming meetings.
Campos Neto stressed that the battle against inflation
continues, adding that data, including the closely monitored
service prices, is showing improvement, though at a sluggish
pace.
He also said Brazil's second-quarter GDP performance was "pretty
good," surpassing expectations and had positive elements, which
should improve public revenues.
(Reporting by Marcela Ayres; Editing by Kylie Madry and Richard
Chang)
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