Tombini: Central Bank will intervene in the exchange rate market when it deems necessary.
"In the case of Brazil, we have the capacity to ensure that the foreign exchange market continues to function properly, with liquidity," said the president of the Central Bank after a conference in Washington.
The president of the Central Bank (BC), Alexandre Tombini, once again expressed calm regarding the rise of the dollar against the real and said that the BC will act whenever it deems necessary. "We have to see where this new pattern of the international exchange rate will stabilize in the coming days and weeks. We have the capacity, in the case of Brazil, to ensure that the exchange market continues to function properly, with liquidity," Tombini told journalists after a conference promoted by the Brazil-United States Chamber of Commerce in Washington.
He did not say, however, whether the institution will intensify currency swap auctions to stabilize the exchange market. "Whenever we feel the need to enter the market, the Central Bank will be there to ensure the tranquility of the exchange market in Brazil," he said. "But we have a floating exchange rate regime and we have to admit that the exchange rate can go in both directions."
The president of the Central Bank was more vague when asked if he is concerned about the situation of Brazilian companies with greater exposure to the dollar. "If we see any dysfunction, we have instruments to act."
Yesterday, Finance Minister Guido Mantega also expressed calm regarding the exchange rate, saying that it is a normal movement in times of increased risk aversion.
Inflation
Alexandre Tombini also stated today that inflation in the country is under control and should fall by April and May 2012, converging to the center of the target, 4,5%, by the end of next year. Tombini said that the Central Bank will assess the impact of the dollar's appreciation against the real on inflation.
"The impact of exchange rate fluctuations on domestic prices has decreased over time in Brazil, and we will always assess these conditions in the Central Bank's work to ensure that inflation stabilizes and converges towards our inflation target," he stated.
Asked if the devaluation of the real altered the monetary easing cycle, initiated at the last meeting of the Monetary Policy Committee (Copom), he replied: "No, the Central Bank holds meetings every six weeks, and every six weeks we evaluate all the conditions of the Brazilian economy, how the international scenario and the global economy have evolved. Exchange rate conditions are also taken into consideration," he said.