SAO PAULO--The U.S. Federal Reserve has signaled that it will take a very gradual approach to withdrawing monetary stimulus, which means there will be less impact on emerging markets, Brazil's finance minister, Guido Mantega, said Wednesday.
Earlier, in something of a surprise decision, Fed officials maintained their program for buying $85 billion in bonds per month, and said there needs to be more proof that the economy can stand on its own two legs before making any changes.
"The Fed today gave a signal that it will be a soft landing, which means it will only cut the stimulus very gradually," Mr. Mantega told reporters.
The market had lightly exaggerated the impact of the tapering, which was reflected in the sharp depreciation of the Brazilian currency, Mr. Mantega said.
Monetary stimulus put in place in the U.S. and other developed countries to combat the economic crisis was seen as a key driver behind the previous strong appreciation of many emerging market currencies, including the Brazilian real.
But the Brazilian currency fell sharply against the dollar earlier this year as the market began to take into account the possibility that the Fed would start to cut back on its bond purchases.
Mr. Mantega said the Fed got its communications wrong, and the market became confused. He said he believes the stimulus withdrawal will be very slow and therefore will have little impact on emerging markets.
In the Brazilian currency market, volatility has declined over the last month, and the currency depreciation should ease, which means less pressure for inflation, Mr. Mantega said.
Meanwhile, Mr. Mantega said he expects the Brazilian economy to grow in the third quarter, although it will be more modest than in the second quarter.
A number of economists are expecting the economy to contract in the period. Mr. Mantega said he believes growth may come in above his current assumption of 2.5%.
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Earlier, in something of a surprise decision, Fed officials maintained their program for buying $85 billion in bonds per month, and said there needs to be more proof that the economy can stand on its own two legs before making any changes.
"The Fed today gave a signal that it will be a soft landing, which means it will only cut the stimulus very gradually," Mr. Mantega told reporters.
The market had lightly exaggerated the impact of the tapering, which was reflected in the sharp depreciation of the Brazilian currency, Mr. Mantega said.
Monetary stimulus put in place in the U.S. and other developed countries to combat the economic crisis was seen as a key driver behind the previous strong appreciation of many emerging market currencies, including the Brazilian real.
But the Brazilian currency fell sharply against the dollar earlier this year as the market began to take into account the possibility that the Fed would start to cut back on its bond purchases.
Mr. Mantega said the Fed got its communications wrong, and the market became confused. He said he believes the stimulus withdrawal will be very slow and therefore will have little impact on emerging markets.
In the Brazilian currency market, volatility has declined over the last month, and the currency depreciation should ease, which means less pressure for inflation, Mr. Mantega said.
Meanwhile, Mr. Mantega said he expects the Brazilian economy to grow in the third quarter, although it will be more modest than in the second quarter.
A number of economists are expecting the economy to contract in the period. Mr. Mantega said he believes growth may come in above his current assumption of 2.5%.
nasdaq.com
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