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UPDATE 2-Brazil's Mantega calls on Fed to cut stimulus soon
December 18, 2013 / 3:40 PM / 4 years ago

UPDATE 2-Brazil's Mantega calls on Fed to cut stimulus soon

BRASILIA, Dec 18 (Reuters) - Brazil’s Finance Minister Guido Mantega on Wednesday called on U.S. policymakers to start winding down their monetary stimulus measures sooner rather than later to reduce market uncertainty that has kept emerging economies on edge.

The Federal Reserve will decide later on Wednesday whether it is the right time to start trimming its $85 billion-a-month bond purchases. The Fed is widely expected to scale back that stimulus next year, but a growing number of economists believe policymakers could begin on Wednesday.

Emerging economies like Brazil and India are bracing for the Fed’s decision, which could weaken their currencies and boost their current account deficits.

“The reduction will cause some volatility in the forex market, we don’t know how much volatility... it will depend on what the Fed decides,” Mantega said.

“I would like for them to do this soon because this uncertainty creates market turbulence. It is not good to leave markets waiting.”

Speaking to reporters in Brasilia, Mantega also said the government will announce a “clear” fiscal goal for 2014, adding that this year’s fiscal result should be sufficient to keep lowering the country’s debt-to-GDP ratio.

He declined to say whether the government will stick to a previous primary surplus goal equivalent to 2.1 percent of GDP in 2014. He said the goal will be announced early next year, but promised to reduce some expenditures like current spending and employment benefits to improve finances.

He acknowledged that last-minute financial operations to bolster fiscal results in 2012 lacked transparency, but promised to stay away from such moves, which some analysts say hurt the government’s fiscal credibility.

“We have all the conditions to continue to deliver results that bring down the country’s net debt,” Mantega said.

He added that a more “favorable” exchange rate will help the domestic industry next year as well as the farming sector.

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