2023-04-19 19:01:47
Campos Neto stated that the general inflation index was affected by the tax changes that occurred in the price of energy
The president of the Central Bank, Roberto Campos Neto, reinforced the deceleration of inflation at the margin, but pondered that, in terms of monetary policy, it is necessary to see more data and monitor the inflationary dynamics, not least because there is uncertainty about some important prices, such as the Petroleum. He mentioned, during his participation in a meeting with investors in London, the recent production cuts by OPEC and said that the market is understanding that there is less chance of lower prices for the commodity.
Citing the government’s announcement of the fiscal framework as positive as well, the BC president repeated several times that the monetary authority monitors several variables for conducting monetary policy, such as projections and expectations of inflation, market and commodity prices. “What we’ve been trying to communicate is that many of these variables have deteriorated since December.”
The president of the Central Bank also stated that the general inflation index was affected by changes in taxes that occurred in the price of energy, telecommunications and gasoline. He added that in a scenario of inflation expectations much higher than the target on the horizon, even with an economic slowdown taking place, it is necessary to look at this dynamic more carefully.
Campos Neto commented on the criticisms about the real interest rate in Brazil being higher than in many countries.
The president of the autarchy argued that in comparison with countries like Mexico and Chile there is not much difference and that it is not possible to compare it with that of developed countries, because there are different dynamics of inflation and of the channels of monetary policy action.
He admitted, however, that the Brazilian rate is higher than that of some other countries in the world, but pointed out that this difference has diminished over the years.
inflation targets
The president of the Central Bank reinforced that the monetary authority does not decide on the inflation target, but said that the BC’s recommendation is that a change “should not be made”. “We haven’t decided on a target, but our recommendation is that no change should be made.”
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According to Campos Neto, the assessment is that a change in the target would increase the risk premium. Based on research and current market behavior, the interpretation is that an increase in the target would lead to an even greater advance in inflation expectations. “Today the interpretation is that a change in the target would not provide flexibility in monetary policy,” he said, adding that, in the long term, the change would bring harm.
The BC president also recalled that, regardless of the effect produced, a possible change in the target would not have an immediate impact on the monetary policy, since its conduction needs to first assess the evolution of inflation expectations.
Today, the inflation target is set at 3.25% for 2023 and 3.00% for 2024 and 2025, with a band of 1.5 percentage points more or less. In a real offensive against the Selic rate of 13.75%, the federal government has also questioned the level of the targets, which are defined by the National Monetary Council (CMN).
Regarding monetary policy, Campos Neto emphasized that the Central Bank’s mandate is to set inflation on target. “We want to do this and it’s the best we can do for Brazil. Brazil has a very strong indexation mechanism and it is even more important to prevent this, ”he said, noting that high inflation harms the poorest classes the most.
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Activity
The president of the Central Bank said that the autarchy already sees activity slowing down in response to the monetary tightening. He added, however, that he is waiting to see what the effects of the government’s recent announcements on economic activity will be.
“The services sector is performing a little better, but industry is slowing down, although stable,” said Campos Neto, adding that consumption is slowing down slowly at the margin. The mayor added that there is moderation in the labor market, although the data still indicate some resilience.
Campos Neto also said that the global slowdown is likely to contribute to the local slowdown process and that the effects of financial stability issues around the world have yet to be seen. The BC president added that the slowdown in credit growth seems to be hitting developed countries more than emerging ones.
The BC president participated in a meeting with investors in London, organized by the European Economics & Financial Center (EEFC).
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