(Adds comments on FX in paragraphs 9-10)
BRASILIA, Nov 22 (Reuters) - Brazil's central bank chief, Roberto Campos Neto, defended the effectiveness of monetary policy on Wednesday while emphasizing the ongoing need for further fiscal control.
Speaking at an event organized by lawmakers from the congressional entrepreneurship caucus, Campos Neto said, "Brazil is recognized as a country that has done its homework on monetary policy."
He highlighted the convergence of inflation to the target range alongside improved economic performance and a credit market that did not experience the feared collapse.
Campos Neto reinforced that there is room to cut interest rates without impacting the exchange rate, as the country's interest rate differential compared to advanced economies remains high.
Since August, policymakers have already reduced interest rates by 150 basis points to 12.25% and signaled further cuts of 50 basis points in each of the next two meetings to January.
Regarding the control of public accounts, however, Campos Neto said that "it is important for Brazil to do its homework on the fiscal issue" as a backdrop of reduced global liquidity should affect emerging countries from early 2024.
He praised the government's new fiscal rules proposing a zero primary deficit next year as positive but expressed concerns that abandoning these rules complicates predicting the behavior of public accounts, creating uncertainties.
"It's important to insist and persevere, but Brazil has a structural spending problem that needs to be addressed at some point," he added.
Following Brazilian real's rise by 7.7% year-to-date, Campos Neto said that the currency "has shown surprising strength," partly supported by a positive flow of U.S. dollars from the commercial channel, driven by agribusiness exports.
He also mentioned that the country's increased oil production will contribute to this flow going forward. (Reporting by Marcela Ayres; Editing by Andrew Heavens and Steven Grattan)