We will act independently to control inflation, says Campos Neto

The Central Bank has autonomy and will act independently with the instruments it has at its disposal to control inflation, said the president of the autarchy, Roberto Campos Neto, this Wednesday (8).

Participating in a virtual event promoted by Credit Suisse, Campos Neto said that the BC knew about the energy crisis, but never expected it to assume the format it has today.

He also considered that many shocks occurred in the economy, with core inflation – a measure that seeks to disregard temporary effects – getting “much higher” than the BC would like, and with the monetary authority seeing reflections of this deterioration in the long part of the interest curve .

“We think it’s very important to act quickly on this, to ensure that there is no undoneness in the system that generates inertial inflation going much higher,” he said in English.

“What needs to be said is that we have autonomy, we will act independently with the instruments we have, we think the instruments we have will do the job and we need to make sure we communicate this wisely,” he added.

Campos Neto’s message comes amid the strong advance in prices in the economy this year, driven by the water crisis that catapulted the cost of electricity and the rise observed in commodity prices and the dollar – the latter affected by fiscal and institutional fears, with President Jair Bolsonaro’s stance of confrontation in relation to the Federal Supreme Court (STF) contributing to heighten uncertainties.

The scenario of multiple shocks has made expectations for inflation in 2022 also worse, said Campos Neto, despite having reiterated that there is a large distance between the higher market projections and the lower monetary authority projections for the IPCA in the next year.

Market players have continually worsened their inflation forecasts, now at 7.58% for this year and 3.98% for next year, according to the latest Focus bulletin. The official target center in 2021 is 3.75% and for 2022 it is 3.50%, always with a tolerance margin of 1.5 percentage points more or less.

The BC, in its last public estimate, made in August, predicted inflation exactly at the center of the target for 2022, at 3.5%, with an increase of 6.5% this year.


Bolsonaro, who has reelection plans, has blamed governors and the social distancing measures implemented during the Covid-19 pandemic for the rise in inflation in the country.

In his speech, Campos Neto stated that the presidential elections are an important factor and that they will be polarized, which has an impact on volatility. But he reiterated that BC will have an independent role in this scenario.

“We have to understand how (elections) impact our mandate and translate into inflation and growth. What we can do, for our part, is say that we are going to use the instruments we have to ensure that we reach the (inflation) target and we have complete autonomy now and we are going to use that, in the sense that our only commitment is to ensure that we reach the goals”, he said.

Voted by Congress, the BC’s autonomy was approved by the STF recently, establishing fixed terms for BC president and directors. These mandates do not coincide with that of the President of the Republic, with the aim of protecting the institution from political interference.

According to Campos Neto, the fact that market agents have associated the reforms proposed by the government with the desire to carry out a larger income transfer program in an election year contributed to the increase in uncertainties.

He pointed out that it is necessary to “turn the page” regarding the structuring of Auxílio Brasil, how the new Bolsa Família was renamed, with knowledge of how the program will be carried out and how it will be financed.

“When we do that, I think a lot of the noise will go down,” he said.

Since it raised interest rates by 1 point, to the current level of 5.25% per year, the BC indicated that it will repeat the dose at its next meeting of the Monetary Policy Committee (Copom) at the end of this month. The BC also signaled that it aims to take the Selic beyond the neutral level, in an indication that the rate will end the monetary tightening cycle above 6.5%.