Brazil's central bank governor, Gabriel Galipolo, told an audience in Sao Paulo on Monday that the institution's approach will be defined by "calibration" and a strict reliance on incoming data as it prepares to move from a period of tightening to an easing cycle.
Speaking at an event hosted by the banking association ABBC, Galipolo acknowledged that the inflation outlook had improved but cautioned against reading that progress as a signal to relax policy prematurely. He noted that, despite the policy rate standing at a restrictive 15%, some recent labour market figures have surprised policymakers and overall economic activity has proved more resilient than expected given those tight financial conditions.
"This is not a victory lap, because we still have data showing economic resilience. That is why we are talking about an adjustment," Galipolo said, stressing the central bank's continuing vigilance.
He emphasised that the bank does not intend to pin its actions to a single target for real interest rates and warned against any perception to the contrary. "That is not the case. We will continue to monitor the data," he added, characterising this careful, data-driven approach as the way an easing cycle begins.
The central bank has signalled it expects to start lowering interest rates at its next policy meeting in March. At the same time, Galipolo and the bank have urged "serenity" - a measured stance - when it comes to both the speed and the overall scale of cuts, while reiterating that monetary policy should remain restrictive for the time being.
Galipolo also flagged a specific area of concern: inflation expectations. He said the bank remains worried that expectations are running above the 3% target, citing a persistent 50-basis-point "unanchoring" for longer horizons - meaning inflation forecasts that exceed the target by that margin.
That caution is reflected in surveys the central bank runs of economists. For several weeks those surveyed have left their inflation projections for 2028 and 2029 unchanged at 3.5%, even as they have trimmed near-term forecasts. Those nearer-term forecasts, however, still remain above the 3% target.
Galipolo's remarks come against the backdrop of an aggressive tightening cycle the central bank conducted to bring inflation back toward its goal. The bank raised rates by a cumulative 450 basis points during that campaign, paused in July and has kept the benchmark rate at its current level - the highest in nearly 20 years.
The central bank's public messaging in Sao Paulo underscored a twofold priority: acknowledge progress on inflation while signalling continued readiness to react to economic developments, especially where labour market strength and inflation expectations could alter the path of policy.