Brazil’s Tombini Says Central Bank Has ‘Some Room’ to Cut Rates

Alexandre Tombini, president of Banco Central do Brasil, speaks on the central bank’s monetary policy goals. He spoke to reporters in Mumbai today.

“We have been very active in Brazil as far as policy to fight inflation in 2011 is concerned. We had excessive demand at the beginning of the year and we had multiple shocks to deal with.

‘‘Our goal is to bring inflation to 4.5 percent target in 2012 and that is what guides the monetary policy.

‘‘We had to put together a broad set of policies, including a tightening of 175 basis points between January and July. Consumer price inflation expectations are in the order of 5.3 percent for 2012. Our projection is close to 4.7 percent.

‘‘The economy may have grown around 3 percent, the final figure is yet to come, after growing at around 7.5 percent. The last two quarters have been below potential growth. This has opened up space for us to implement policies since August, when we started an easing cycle.

‘‘We don’t have an optimum level of foreign exchange reserves. It is an elusive concept. We have some buffer in our capacity to deal with different international environments. Our reserves, compared to the size of the economy, are on a moderate threshold.

‘‘We have signaled that the monetary easing cycle has not finished. We are in a different environment today than we were at the start of 2011, so we have some room to reduce rates.’’