⁍ Brazil’s central bank president Roberto Campos Neto on Wednesday said that any trigger for higher interest rates would be linked to inflation.

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⁍ In an interview with Jovem Pan radio broadcast on Wednesday, Campos Neto said that he wanted to emphasize that the bank would abandon forward guidance.

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⁍ ‘It was interpreted in some way as if the central bank was saying it was going to raise interest rates, and it wasn’t that,’ Campos Neto said, warning, however, that fiscal slippage could fuel inflation expectations.

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– Brazil’s central bank is backing away from its pledge not to raise interest rates if the country’s spending cap is breached, Reuters reports. The central bank’s president said yesterday that the pledge was “interpreted in some way as if the central bank was saying it was going to raise interest rates, and it wasn’t that.” The spending cap limits public spending to the rate of inflation, and uncertainty over how the government plans to fund a new welfare program has hurt markets. “If there is a breakdown or we think that some type of creative accounting will make the long-term debt profile worse, our initial reaction is to remove this instrument (forward guidance) that forecasts lower rates for a longer time,” the president said.