Marcela Ayres and Bernardo Caram
Brasilia (Reuters) – Brazil’s economy ministry is studying the targeting of the country’s large foreign currency reserves because of inflation, two sources told Reuters Still the top concern
The plan will set a target that Brazil should retain a minimum and maximum amount of its foreign exchange reserves, currently totaling $338 700 million.
Plans for the floating band are preliminary and subject to change, or the government may decide not to pursue the idea, officials said, requesting anonymity due to its sensitive nature.
The economy ministry and the central bank declined to comment.
The sale of foreign exchange reserves by the central bank helps curb the appreciation of the dollar against the Brazilian real and eases inflationary pressures.
The central bank, independent of the federal government, said it only Operate in the Forex market only when you notice wild swings.
Soaring consumer prices in Brazil are a major talking point ahead of October elections, with President Jair Bolsonaro trailing leftist ex-President Luis Inacio Lu in opinion polls La Da Silva.
The goal was first reported by O Globo newspaper on Tuesday.
The goal of a floating band would avoid political manipulation of reserves, especially in an election year, an official said.
This would directly interfere with exchange rate policy, which is solely the responsibility of the central bank.
The existence of such a scheme surprised top technical staff at the Ministry of Economy, who said there was no agreement on a reserve target. A central bank source criticized the idea, saying the exchange rate is “an external variable that you can’t control.”
“It’s stupid,” said the former Central Bank Governor Alexander Schwarzman. He said the currency reflects economic fundamentals and it makes no sense to control its fluctuation.
Lula has said he will not touch the country’s foreign exchange reserves if elected.