2023-12-20 02:10:39
© Reuters. President of the Central Bank, Roberto Campos Neto, speaks during the ReutersNEXT event, in New York 11/09/2023 REUTERS/Brendan McDermid
SÃO PAULO (Reuters) – The president of the Central Bank, Roberto Campos Neto, acknowledged this Tuesday that the real interest rate (discounting inflation) in Brazil is high, although it is falling, and defended that the Lula government continues to seek from the .
During an event hosted by the newspaper Correio Braziliense, in Brasília, Campos Neto stated that the tax issue remains one of the main concerns in the Brazilian market.
He did not address the fact that the risk rating agency S&P had raised, during the afternoon, Brazil’s long-term credit rating to “BB (BVMF:)”, from “BB-“, citing the approval of the tax reform — one of the projects, in the government’s view, that can positively impact the fiscal area.
“It’s important to persevere (with the fiscal target). It’s a permanent struggle,” said Campos Neto, pointing out that the need for extra revenue from the government is what has cast doubt on meeting the target. “Collection is what causes a little more of the nervousness,” he added.
In his presentation, however, Campos Neto repeated that there is no “mechanical” relationship between the fiscal area and the BC’s decisions on , nor between the external scenario and monetary policy.
When addressing the external scenario, Campos Neto highlighted recent statements by the chair of the , Jerome Powell, interpreted by the global market as indications that the institution could start the process as early as March 2024.
“They (Fed members) returned this week to try to soften the speech,” added Campos Neto, in reference to statements in recent days by Fed officials who sought to cool the market’s euphoria surrounding the possibility of the start of the downward cycle of interest in March.
Campos Neto also cited the recent rise in global stock markets, highlighting the advance of the S&P index on the New York Stock Exchange. According to him, Brazil is still “well behind” in this aspect.
Campos Neto’s comment came on a day in which he reached historic highs and approached 132 thousand points.
INFLATION AND GDP
In his presentation, Campos Neto also stated that, contrary to what was projected at the beginning of the year, the BC may not have to “write a letter” to justify possible non-compliance with the inflation target in 2023.
According to the rules in force, whenever the inflation target is not met, the president of the BC must write an open letter to the Minister of Finance, to justify what happened.
This year, the inflation target ceiling is 4.75%. In the report, which compiles market projections, the current expectation is inflation of 4.49% for the period.
“We are approaching a situation in which this (the BC not having to write a letter) is a real possibility,” said Campos Neto. He reiterated, however, that the BC still has work to do in controlling the .
The BC president also assessed that the third quarter was above market expectations, with a “good surprise” in household consumption. However, he stated that one of the recent concerns is the drop in investments. “On the other hand, productivity went up,” he said.
Brazil’s GDP registered an expansion of 0.1% in the third quarter, compared to the previous three months, marking the third consecutive quarter of expansion. The rate released by the Brazilian Institute of Geography and Statistics (IBGE) contradicted the expectations of those heard in the Reuters survey, of a drop of 0.2%.
(By Fabrício de Castro)
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