BC President believes in higher-than-expected growth

Vicente Nunes – Correspondent

posted on 06/28/2022 06:00

“Brazil has always worked with inflation above the developed world. But today, inflation is even below the median”, said the BC president – (credit: Raphael Ribeiro/BCB)

Lisbon, Portugal — The Central Bank is monitoring with a magnifying glass the impact on the economy of the package of goodies that the government is preparing — increase in Auxílio Brasil from R$ 400 to R$ 600 and Pix from R$ 1 thousand for truck drivers — but the president of the institution , Roberto Campos Neto, stated that the worst moment of inflation is over. The cost of living measured by the Broad Consumer Price Index (IPCA) is above 12% in the 12-month period, however, the BC estimates that the indicator will end 2022 closer to 8%.

“We believe that the worst moment of inflation is over. We have some measures designed by the government (valued at up to R$ 50 billion) that we need to understand what the impact is on the inflationary process, it is still not clear”, highlighted Campos Neto, during his participation in the Lisbon Political Forum. For him, there have been positive surprises in the fiscal area, thanks to consecutive collections records, driven, in part, by inflation.

If nothing comes out of the Central Bank’s roadmap, the perspective is that the Monetary Policy Committee (Copom) will promote a final increase in the basic interest rate (Selic) at the meeting scheduled for early August. The Selic is at 13.25% per year and, according to economists’ estimates, it can go up to 13.75%. Interest rates have been rising since March last year, when they reached a historic low of 2%. The BC has claimed that much of the rise in the cost of living reflects the soaring global prices, especially of food and energy.

“Brazil has always worked with inflation above the developed world. But today, inflation is even below the median. Unlike in recent years, when it was Brazilian inflation, there is a very strong global component of inflation”, highlighted the BC president. “Obviously we have to fight inflation. We are not going to use this as an excuse, but it is important to understand the components of inflation”, he amended, warning of another movement seen in the world, the indexation of wages to inflation, which did not reach Brazil.

oil and food

Armed with a series of graphs, Campos Neto emphasized that Brazil was one of the first countries to raise interest rates, so this process is nearing its end, contrary to what is perceived in developed economies. He estimated that monetary tightening in the United States could push the basic cost of money to 4% a year, out of negative rates, but it is not clear whether such a tightening will send the world’s largest economy into recession. , taking other countries along.

He also drew attention to the set of measures that have been adopted around the world to try to contain energy prices, especially that from gas and oil. In his opinion, there is a lack of coordination in the actions, resulting in higher tax costs than those seen in Brazil. “Brazil is not, by far, one of the most affected by energy prices, which is a global issue”, he stressed. Still, President Jair Bolsonaro decided to pick a fight with Petrobras and encourage Congress to pass proposals to hold back fuel prices to try to secure reelection.

In addition to the energy issue, countries have acted to hold back food prices, whose inflation soared after the war in Ukraine, which could result in an unprecedented humanitarian crisis. For the BC president, the energy and food crises are rooted in the lack of a joint plan by governments around the world to guarantee security for the population. “The disconnect between prices and production doesn’t just happen with oil, but with food. The desire to generate food and energy security is being uncoordinated,” he pointed out. He added: “We see that where there is more doubt is about regulation of prices or shares via a state-owned company and something about profits. What is being adopted more is the part of taxes or (income) transfer”.


Campos Neto said that regardless of rising inflation, Brazil’s growth this year will be better than expected. The Central Bank forecast is for a 1.7% increase in Gross Domestic Product (GDP). In his opinion, the second quarter will show a stronger advance in activity, with a deceleration in the second half. This better result of production and consumption caused the unemployment rate to fall to lower levels than observed before the new coronavirus pandemic. Income from work, however, has not followed this more favorable scenario.