Brazil’s Central Bank President Gabriel Galípolo stated on Monday (Mar. 30) that Brazil is in a more favorable position than other countries to face the volatility in oil prices caused by the war in the Middle East. The executive participated in the J. Safra Macro Day, held in São Paulo this morning.

“Of course, everyone would prefer to be in a situation without all these potential risks and shocks that the world has been facing in recent years. But when I compare Brazil to its peers, it seems to be in a relatively more favorable position,” he stated.

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Galípolo argued that this advantage stems from the fact that Brazil exports more oil than it imports, as well as from the contractionary monetary policy adopted by the financial institution, which has kept the nation’s benchmark interest rate – the Selic – at 14.75 percent per year.

“Compared to other central banks, which are closer to a neutral interest rate, I think this also puts us in a more favorable position relative to our peers,” he noted.

In his view, the current high interest rate environment in Brazil has created a buffer that should allow for a cut in the benchmark rate even amid pressure from the war in the Middle East.

“This buffer, which was built up through a more conservative stance during the last few [monetary policy committee] meetings, has allowed us – even in the face of new developments – to maintain the overall policy stance,” he said. “So, we decided to stick to our path and begin the cycle of monetary policy calibration.”

All these factors, he went on, suggest that Brazil is currently “more like an ocean liner than a jet ski.”

“We’re not going to make any sudden or drastic moves. That’s why, in the [monetary policy report], I was careful to point out that the buffer has given us time to observe, understand, and learn more,” he declared.

Inflation

According to Galípolo, this volatility in oil prices on the international stage is likely to lead to higher inflation in Brazil and also to a slowdown in the country’s economy in 2026.

The Central Bank president also said that, in Brazil, rising oil prices have often had a positive impact on the GDP – which is however unlikely to be the case this time.

“This seems to me to be a rise in oil prices of a nature quite different from the past. It does not stem from a demand cycle. It does not stem from an increase in demand, but rather from a supply shock,” he said.

“So, at the Central Bank, our view is that we are likely going to see higher inflation and lower growth,” he projected.