For inflation to stay on target, Selic needs to go to 14%, says Sérgio Vale, from MB Associados

central bank
Selic: Inflation should only return to the Government’s target in 2023 (REUTERS/ Ueslei Marcelino)

Hardly the central bank will be able to keep the inflation within the Government’s goal in 2022, which is 3.5 percentage points, predicts Sérgio Vale, chief economist at MB Associados, in an interview with Money Times.

“To be within the goal, the Selic needs to reach 14%, and I don’t think that’s the case now. The Central Bank is going to do something more spaced out in time, not just bringing inflation. That, maybe, only in 2023, knowing that the battle next year is already, in a way, lost”, he says.

MB Associados works with an expected Selic rate of 11.75%, which would bring inflation to 4.7 points.

Early, the Central Bank raised the Selic by 1.5 percentage points, at 9.25%.

“It came well within expectations. We are working with another 1.5-high scenario for the next meeting. The BC confirmed this”, says the economist.

In a statement, the BC also indicated that it will now work to anchor inflation expectations around the target, and no longer in the central target defined by the government.

According to Gustavo Cruz, economist and strategist at RB Investimentos, there is a growing consensus among economists and the market that it is necessary for the Central Bank to reduce the rate of increase.

“The market is already starting to price what might not be 1.5 at the February meeting, without penalizing and making an explosion in the risk premium. In other words, they are giving the conditions for the Central Bank to arrive at the February meeting with less propensity to raise the rate”, he argues.

With the onslaught, BC closes 2021 with Selic 7.25 points above the historic low of 2%, a level reached amidst the pandemic and which lasted until March, in an attempt to put inflation back on track amid the galloping price advance in the economy.

with Reuters

About Yadunandan Singh

Born in 1992, Yadunandan approaches the world of video games thanks to two sacred monsters like Diablo and above all Sonic, strictly in the Sega Saturn version. Ranging between consoles and PCs, he is particularly fond of platform titles and RPGs, not disdaining all other genres and moving in the constant search for the perfect balance between narration and interactivity.

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