Increase in core inflation worries, says BC president
The president of the Central Bank (BC), Roberto Campos Neto, said this Tuesday (14) that, although there are questions regarding the short-term fiscal framework in Brazil, market agents point out that the great weakness lies in the capacity to the country to grow in the long run.
In a presentation during an event promoted by the Federal Court of Accounts (TCU), Campos Neto said that the monetary authority has shown concern with the increase in inflation cores in Brazil and highlighted that price indices are clearly taking off, with "dissemination elements greatly expanded”.
At the event, the BC president said that the unanchoring of inflation expectations for 2022 is similar to that observed in 2017, being “superimportant” for BC to act and anchor expectations.
"The most evil tax we have is inflation, it is very important to act quickly, consistently, in a transparent manner so that we can abort this process of decoupling," he said.
According to Campos Neto, market agents are saying that Brazil's structural growth is lower than previously forecast.
“Part of this award in the long part of the curve is in part associated with [tax] noise, but there is question about the country's capacity to grow,” he said.
Campos Neto stated that the monetary tightening cycle in the world should further dry up liquidity and highlighted that Brazil would need these investments to generate economic growth at a time when the fiscal part "is exhausted".
When talking about the difficulties observed in the projections for inflation during the covid-19 pandemic, the BC president stated that the central bankers were prepared for a depression that did not come, with a recession being observed. He said there is a global “inflation surge”, noting that there has been a disruption in trade chains, especially due to a surge in demand for goods.
In Brazil, the BC president said that the measures to fight the pandemic were effective and allowed for a faster return to activity. However, he stated that it is now possible to see emerging countries accelerating more strongly than the Brazilian economy.
Campos Neto also said that the more volatile parts of inflation began to show some cooling, but he added that it is still necessary to see how this movement will take place.
The minutes of last week's meeting of the Monetary Policy Committee, released this Tuesday, kept a tough tone in relation to inflation and signaled that the BC may maintain the base interest rate at a high level for a longer time to tame the index and the inflation expectations.
The document shows that BC evaluated scenarios with more intense adjustment in the Selic than the 1.5 percentage point increase made last week, as well as tables in which the interest rate remains high for a longer period.
Text translated using artificial intelligence.
