(MENAFN- The Rio Times) Brazil's new central bank chief, Gabriel Galípolo, used a São Paulo forum to send a blunt message: the economy is still running hot.

He pointed to a tight labor market and a wider current-account deficit as evidence of strong domestic demand rather than hidden weakness.

Arguing that to doubt the jobs picture is to“deny the data,” he framed the external gap as a textbook side effect of growth: when people work and spend more, imports, travel, and profit remittances rise.

The numbers back the narrative. Unemployment is near a historic low at around 5.6%, with formal payrolls still adding jobs this year. Output continues to expand-modestly quarter to quarter, but solidly compared with a year earlier.

Inflation eased in August before firming in September's preview, keeping the 12-month rate above target and forcing policy to stay restrictive.

On the external front, Brazil is running a current-account deficit-roughly three and a half percent of GDP over 12 months-but it is being financed by meaningful foreign direct investment, and the country holds international reserves on the order of $350 billion.



The story behind the story is a policy trade-off. Brazil 's disinflation is incomplete, so interest rates must stay high enough to anchor prices.

That cools credit and investment, yet the labor market has remained resilient-helped by services and public- and private-sector hiring-so domestic demand hasn't cracked.

The wider deficit reflects that resilience more than exhaustion. Crucially, stable FDI inflows and large reserves reduce the risk that an external wobble turns into a crisis.

Why this matters beyond Brazil: for households and firms, borrowing costs will shape spending through year-end; for investors, the mix of firm employment, still-elevated inflation, and an externally financed expansion argues for a gradual cooling, not a sudden stop.

The open question is timing: how long rates must stay restrictive to finish the job on inflation without tipping the labor market.

Galípolo's signal is that Brazil can walk that line-accepting a bigger external gap for now-so long as financing stays steady and inflation keeps inching down.

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