We will raise interest rates as far as necessary to contain inflation

The president of the BC (Central Bank), Roberto Campos Neto, said today that the BC’s “flight plan” to control inflation looks for a longer horizon and that, despite some inflationary surprises, the monetary authority will not react to each new data.

Questioned, during an event promoted by BTG Pactual, if the message that it will do whatever is necessary for inflation was directed towards the high Selic cycle – the economy’s basic interest rate – and the tightening pace, or only for the cycle, he sought to scrutinize the BC’s intention with the communication adopted.

“When we say ‘whatever it takes’ (do whatever it takes), basically we mean the following: we have an instrument in hand that will be used the way it needs to be used and we understand that we can take the Selic as far as it needs to be taken so that we have a convergence of the target in the relevant horizon,” he said.

“But we would also like to say that this does not mean that the BC will react, that there will be changes in the flight plan, for each high frequency data that comes out,” he continued.

“In other words, some things we have communicated, I had already anticipated, some things of dissemination (inflation) are a little worse in fact at the end, but we have a flight plan that we look at in a longer horizon”, completed.

Brazilian inflation has surprised upwards and, in the 12 months until August, it reached 9.68%, far from the official target ceiling for this year, of 3.75%, with a margin of 1.5 percentage points more or for less.

The scenario has made market agents continually adjust expectations for 2022, a year that integrates with greater weight the relevant horizon of BC.

In the most recent Focus survey, the estimate is for an inflation of 8% this year and 4.03% next year, above the center of the target, which is 3.5% for 2022, also with a tolerance margin of 1.5 point.

As a result of the situation, the market forecasts that the BC will end 2021 by adjusting basic interest rates to a higher level: 8%, compared to the current level of 5.25% and a rate of 2% at the beginning of this year.

The BC’s Monetary Policy Committee (Copom) meets next week to decide on the Selic. Since August, the signal was that the authority expected a new increase of 1 percentage point for this month.