Balance of risks is not a guidance tool for monetary policy, Brazil central bank director says
Adds further comments, context, paragraphs 3-8
Aug 22 (Reuters) -The balance of risks of Brazil's central bank should not be seen as a guidance tool for monetary policy, the bank's director of economic policy, Diogo Guillen, said on Thursday.
In the minutes of its latest interest rate-setting meeting, where borrowing costs were held steady at 10.50%, the central bank had said earlier this month that its board now sees more upside than downside risks to inflation, though there was no consensus on whether the balance was "asymmetric".
Speaking at an event in Rio de Janeiro on Thursday, Guillen said there had been "an overemphasis on the balance of risks as a guidance tool," adding that "it should not be interpreted that way."
Guillen said the balance of risks reflects how the rate-setting committee think about the variables affecting inflation dynamics.
"Obviously, when you start thinking about inflation dynamics, it leads to a certain approach to interest rates. But I don't think it's clear guidance," he added, reiterating once again that the central bank decided not to give guidance as it is data-dependent.
Brazilian central bank monetary policy director Gabriel Galipolo, widely seen as the likely successor to Governor Roberto Campos Neto, whose term ends in December, has stressed earlier this month that he was among those who viewed the balance of risks as asymmetric.
As this language is often seen as laying the groundwork for rate hikes, his comments fueled more hawkish bets on a monetary tightening cycle starting as early as the upcoming September 17-18 meeting.
Campos Neto has refrained from disclosing which group he belonged to in the assessment of the balance of risks. He recently emphasized that since the minutes came out there has been no change in the central bank's message that there is no indication for future steps, in comments that tempered more hawkish bets that had been driving interest rate futures.
Reporting by Bernardo Caram; Writing by Marcela Ayres; Editing by Gabriel Araujo, William Maclean
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