Monday, December 11, 2023

The Head of the Central Bank of Brazil warned that inflation expectations may not converge

BRASILIA, Sept 29 (Reuters) – Brazil’s Central Bank President Roberto Campos Neto said on Friday that inflation expectations were not in line with official targets and noted that they would not be anchored if fiscal targets in the government will not unite. .

In an event organized by asset manager 1618 Investimentos, he referred to this situation as a “double disassembly” that needs to be resolved.

On the one hand, the market does not believe that the central bank will reduce inflation to the 3% target in the coming years. On the other hand, it projects a primary deficit for 2024 of 0.8% of the Gross Domestic Product (GDP), while the government’s goal is to eliminate it next year, said Campos Neto.

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“There is a relationship between these two disassembly. In other words, you need to anchor the money and anchor the fiscal. Doing one thing without doing the other is very difficult, it will be expensive and it will not be achieved ,” he added.

Although he recognized the increase in consumer prices in Brazil, he noted that inflation readings remained above the center of the target, while inflation expectations were higher than the official targets.

“We have a lot of work to do,” he said.

The government of President Luiz Inácio Lula da Silva will have to increase revenue “a lot” to achieve the fiscal goal as planned, said Campos Neto, predicting an improvement in fiscal expectations while the income tax increase was approved by Congress.

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The central bank began an easing cycle in August and last week cut its benchmark interest rate by another 50 basis points, to 12.75%. In the past, authorities have kept rates steady for nearly a year to curb inflation.

Nation World News Desk
Nation World News Desk
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