By Marcela Ayres

(Reuters) – Brazil’s central bank director of monetary policy, Gabriel Galipolo, disagrees with interpretations of his recent statements suggesting the bank is forced to raise interest rates. He spoke at an event in Sao Paulo, reiterating that policymakers are data-dependent and have all options available.

Galipolo asserted that the market understands the central bank has flexibility for its monetary policy decision on September 17 to 18, following a clarification that rate hikes may not be immediate.

“A difficult position for the central bank is not having to raise interest rates. The difficult position for the central bank is dealing with inflation outside the target,” he explained. “Inflation outside the target is an uncomfortable situation. Raising interest rates is a routine part of fulfilling the central bank’s role.”

He stressed that his recent statements align with previous communications made by the central bank. Galipolo’s comments reflect ongoing efforts by the bank’s rate-setting committee to clarify its stance after maintaining steady borrowing costs at 10.5%, despite initial perceptions of a hawkish outlook.

Earlier, Diogo Guillen, the bank’s director of economic policy, highlighted the need to interpret the balance of risks more judiciously, stating it should not guide monetary policy.

This month, the central bank indicated a greater perception of upside inflation risks, though there was no agreement on whether the balance was asymmetric. Guillen added that the emphasis on this balance as a guiding tool had been overstated.

As the likely successor to Governor Roberto Campos Neto, whose term concludes in December, Galipolo remarked he views the risk balance as asymmetric. This interpretation often implies the possibility of rate hikes, which intensified expectations of a tightening cycle beginning next month and lasting into early 2025.

Galipolo cautioned against linking an asymmetric risk balance directly to policy guidance. Campos Neto has remained non-committal in previous remarks about his group’s assessment of the risk balance, mitigating prior hawkish predictions influencing interest rate futures.