The President of the Central Bank, however, reiterates that he will not change the ‘flight plan’ with each new high-frequency economic data
The president of the Central Bank, Roberto Campos Neto, said on Tuesday, 14, that the monetary authority will lead to Selic wherever it is necessary to meet the goal of inflation, but that the “flight plan” will not be changed with each new release of high frequency economic data. “We have an instrument that will be used in the way it needs to be used. We understand that we can take Selic as far as it needs to in order to reach the goal [de inflação]. This does not mean that the central bank will react to each high frequency data”, said the institution’s president in the last speech before the beginning of the silence period for the next meeting of the Monetary Policy Committee (Copom), as of this Wednesday, 15. The BC pursues the inflation target of 3.75%, with a margin of 1.5 percentage points up or down, that is, between 2.25% and 5.25%. Inflation reached 0.87% in August — the biggest jump in 21 years — and accumulated a 9.68% high in the last 12 months. According to Campo Neto, some pressure items had already been anticipated, while others are more persistent than planned. “We have a flight plan looking further afield,” he said in his participation in an event held by BTG Pactual bank.
The Copom meets next week to debate the economy’s basic interest rate. In August, the BC raised the Selic to 5.25% by adding 1 percentage point. In a note, the monetary authority signaled another increase of the same magnitude. The rise in inflation, however, led analysts to forecast a more robust rise, at around 1.25 percentage points. The escalation of the Broad Consumer Price Index (IPCA) made the financial market change to 8% the expectation of inflation in 2021, according to data from Focus Bulletin released this Monday. The constant upward revision of the forecast for this year puts pressure on the risk of contamination of the index in 2022. Market analysts also changed the IPCA estimate for next year upwards to 4.03%, against a projection of 3.98% for the week last. For 2022, the national monetary authority pursues the 3.5% target, with a variation between 2% and 5%. According to Campos Neto, BC seeks to decipher the detachment of expectations for next year’s IPCA. “It is important to understand which component presents itself”, he said.
When mentioning inflationary pressures, Campos Neto listed the climate issue and the recent water crisis, which ends up impacting the increase in the price of electricity, one of the main villains of the IPCA this year. The president of the Central Bank also commented on Petrobras’ pricing policy and the impacts of fuel transfers, the main sector that drove inflation up last month. “Petrobras, for example, passes prices much faster than most other countries,” he said, adding that the BC monitors this movement of high commodity prices.