Worst of inflation is over, Brazil Central Bank president says
The statement was made during the 10th Legal Forum in Lisbon
Published in 27/06/2022 - 15:48 By Pedro Peduzzi - Brasília
The president of Brazil's Central Bank, Roberto Campos Neto, said today (27) that “the worst moment of inflation is over,” and that, as a result of Brazil’s history of high inflation rates, the Brazilian monetary authority was able to “come out ahead” and implement the tools capable of curbing the inflationary process.
The statements was made at a panel entitled Erosion in the International Public Order and the Future, at the Tenth Legal Forum in Lisbon. In his speech, Neto noted that Brazil “is one of the few countries in the middle of this process with upward revisions” of the gross domestic product (GDP).
“As a matter of fact, our last revision at the Central Bank increased [the GDP growth forecast] from 1.5 to 1.7 percent [in 2022]. We’ll probably have a strong GDP in the second quarter. Obviously, at some point, everything we’re doing will bring in some deceleration in the second half. But still, growth is much better than what was expected at the beginning of the cycle,” said Campos Neto.
Brazil’s experience with fighting inflation has helped devising a strategy to tackle the issue. “Since, in my opinion, we in Brazil understood a little earlier than other countries that it was more of a demand problem, the Brazilian Central Bank came out ahead because we have a much longer memory of inflation, as well as indexing mechanisms that are much more alive,” he said.
Campos Neto pointed out that all countries are raising interest, adding that while some countries are halfway there, Brazil is fairly close to having done all the work. “We’re still going to see some nations raising interest rates significantly,” he went on to argue.
Brazil, Campos Neto stated, is still dealing with a “component of acceleration in inflation.” Nonetheless, he said he believes the worst of the inflation is gone. “We have some measures designed by the government whose effects on the inflationary process we still need to understand, but Brazil anticipated its measures and we believe that our tool is capable of curbing, and will curb, inflation.”
Prices and investment
To the judgment of the head of the Brazilian Central Bank, the inflation rates registered across several countries have their origin in a “disconnection between prices and investments,” which goes beyond oil to include food.
“Governments are facing the challenge of ensuring energy and food security for their people,” he said. In this connection, “many countries, due to the war, are adopting protectionist measures that are contaminating the rest of the inflation chain.” “And the governments’ efforts to generate food and energy security are being carried out in an uncoordinated way and pulling down investment,” he added.
“We need to understand that it is not the government producing food and energy, but the private sector, and that the government must address the problem of the lower classes but cannot deviate from market practices, because, in the end, food and energy are produced by the markets,” he declared.
Translation: Fabrício Ferreira - Edition: Aline Leal