The president of the Central Bank, Roberto Campos Neto, avoided this Tuesday, 31, predicting what the final Selic rate will be in the current cycle of high interest rates, but assured again that the BC will do what is necessary to bring inflation to the target. with the instruments available to the BC.
The statement was made during participation in an extraordinary public hearing at the Consumer Protection Commission of the Chamber of Deputies. This is Campos Neto’s first face-to-face participation in a National Congress commission since the beginning of the pandemic.
The BC Economic Policy Committee (Copom) signaled in the communication of its last meeting that a new increase in the Selic rate is “likely” at the next meeting, in June, at a slower pace than the movement made this month. At the beginning of May, the Copom raised the Selic rate by 1.00 percentage points, from 11.75% to 12.75% per year.
Campos Neto said that if the timely adjustment of Brazilian interest rates has credibility with the market, inflation will once again be controlled.
“With good communication and credible timely interest rate adjustments, we can control inflation. What most generates inequality is inflation. Those who have money have access to financial instruments to protect themselves from inflation. The best instrument for sustainable long-term growth is to have inflation under control. We try to bring inflation to target with as little economic wear and tear as possible,” he said.
Regarding the elections, Campos Neto stated that the electoral cycle has no effect on monetary policy, especially after the approval of the agency’s autonomy.
“But if there is an increase in risk premiums close to the elections, we will take this into account (the effect on interest rates) and we will have to adapt”, said Campos Neto.
And he repeated: “I cannot anticipate the Copom’s decisions, but I would like to emphasize that we are going to do everything in our power to bring inflation to the target. What we do today no longer influences 2022. We have the mandate to follow and we will do what we can.”
Still on the BC’s autonomy, he said that the monetary authority evaluated that the tough measures taken in the current cycle of high interest rates have more credibility due to the autonomy of the body approved last year.
“The timing of BC’s autonomy was very good. People know that it is not a political action, but an action for the country. A part of our work ends up putting the brakes on the economy, but we want to do it with the least possible disruption to the social fabric and the least impact on the productive sector,” said Campos Neto.
Petrobras and pricing policy
The Central Bank president avoided commenting on Petrobras’ pricing policy, but warned that several countries are preferring to interfere in fuel prices during the current oil shock.
“The problem of interfering in prices is to affect the investment policy of companies”, he limited himself to replying, in the extraordinary public hearing.
Definition of the inflation target
Campos Neto said who sets the inflation target is the National Monetary Council (CMN), and not just the BC. “We understand that we have a goal to fulfill, it’s how the BC mandate is done”, he limited himself to commenting.
The inflation target for 2025 will be defined at the June CMN meeting. The CMN includes the Minister of Economy, Paulo Guedes, the special secretary for the Treasury and Budget, Esteves Colnago, and Campos Neto himself.
The president of the Central Bank said that the BC is trying to ensure that there are resources for the Safra Plan. “We have been talking to the Ministries of Economy and Agriculture to seek a solution with an adequate volume of resources for the Safra Plan”, he said.
As shown by Broadcast (Grupo Estado’s real-time news system), the Special Secretariat for the Treasury and Budget (Seto), of the Ministry of Economy, blocked approximately R$ 1.2 billion in expenses that will be reallocated to subsidy fees lines of the next Crop Plan, 2022/23, in the second half of the year, out of a total of approximately R$ 4.3 billion blocked for rural credit and the Agricultural Activity Guarantee Program (Proagro).
Campos Neto highlighted that food prices have been impacted by the high price of diesel. “We have a very low supply of diesel in the world, we had only four days of diesel, for an average of 120 days. Diesel impacts the other chains and we have seen that the energy part of inflation has impacted other sectors”, he added.
Campos Neto also said that the BC has had a great gain from swap operations. “Remembering that our objective is not to have a gain or a loss, but to stabilize the currency. Our interventions are not aimed at pricing, but at solving market dysfunctions. But we have been acting less in recent months,” he said.
Due to the strike by BC civil servants, the institution has not released statistics on its foreign exchange operations and their effects on the financial authority’s net foreign exchange position on a weekly basis.
At the hearing, Campos Neto repeated his praise for the government’s fiscal performance. “In the short term we have had consecutive positive surprises in the fiscal. We are talking about reaching a gross debt very close to pre-pandemic after a huge government program at the beginning of the pandemic. This shows the huge fiscal effort of the government,” he said.
Campos Neto reassessed that Brazil continues to pay a high premium for fiscal risk because the market believes that the short-term fiscal outlook depends on a better perspective of the economy’s growth capacity in the years ahead.
“Part of the fiscal problem today is not short-term. But investors need to see a way for Brazil to have long-term structural growth”, reaffirmed the BC president.
“Even after all the reforms we’ve done, people think that Brazil’s structural growth has dropped. This could mean that there are more reforms still to be done,” he added.
energy and food
The president of the Central Bank also repeated that Brazil has the opportunity to be a major supplier not only of food and energy, but also of inputs for the goods industries of the western world.
“In an effort to have food and energy security for their population, governments are closing and distancing themselves from market practices. In the end, it is not governments that produce energy and food, but private companies. It is extremely important to understand that if everyone closes down and forgets about the global value chain, we could have a much more serious problem with energy and food in the coming years,” said Campos Neto.
(With Estadão Content)
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