Brazil’s Meirelles: Fed’s latest move on G20 agenda

The head of Brazil’s central bank said on Thursday that the U.S. Federal Reserve’s latest plan to lower domestic borrowing costs and jumpstart the ailing economy would cause further “distortions” in world markets and complicate his country’s efforts to stem the rise of its currency.

Speaking to reporters after an event at the University of Chicago’s Booth School of Business, Henrique Meirelles said the Fed’s effort to drive interest rates lower through a policy of quantitative easing — or “QE” for short — was having “negative consequences for other countries,” including his own.

He said the issue would be on the agenda at the upcoming G20 meeting in Seoul, the first for the country’s new president-elect, Dilma Rousseff.

“QE creates excessive liquidity that flows over to countries like Brazil,” Meirelles said. “Definitely, for Brazil it does create a problem and Brazil will present proposals in that regard to several countries — the U.S. and China — to reach a different agreement not to generate so many distortions.”

The Fed’s controversial plan involves buying as much as $600 billion in government bonds and is widely expected to weigh on the value of the U.S. dollar.

That’s likely to be bad news for Brazil, which is already struggling to find ways to slow a recent deluge of foreign cash into the country, which is boosting an already overvalued real and hurting exporters.

Asked if Brazil’s central bank was contemplating additional measures to manage the risk arising from the flow of hot money into his country, Meirelles said: “No. We are only evaluating what has been done so far.”

Asked if he expected Rousseff, the left-leaning winner of Sunday’s presidential election, to ask him to remain at the helm of the central bank once she takes power, Meirelles said: “There is no expectation … In the right moment, she will make all the decisions and will communicate them.”

He added, however, that he was confident the “choices will be good ones.”