Let’s stop the inflationary process, says Campos Neto

Let’s stop the inflationary process, says Campos Neto

In the last minutes of the Monetary Policy Committee (Copom), the BC indicated a new hike in the basic interest rate, today at 13.25%

the president of Central Bank (BC)Roberto Campos Neto, assured that the monetary policy adopted by the municipality is capable and will slow down the inflationary process in Brazil and assessed that most of the process has already been done. “We believe that the available tool is capable and will stop the inflationary process. We believe most of the process has already been done,” he said. “We need to do work to anchor expectations, it’s very important,” he said, at another time.

In the last minute of Monetary Policy Committee (Copom)the BC indicated a new high in base interest rate, today at 13.25%, at the August meeting, of equal (0.50 pp) or lower magnitude than in June. Furthermore, it signaled that the Selic rate should stay longer in significantly contractionary terrain, ending next year at a higher level than in the baseline scenario (10%).

Campos Neto participated this Monday, 27, in the Lisbon Legal Forum, promoted by the Institute of Legal-Political Sciences and the Public Law Research Center of the Faculty of Law of the University of Lisbon (ICJP/CIDP), the Brazilian Institute of Teaching, Development and Research (IDP) and Fundação Getulio Vargas (FGV).

The president of the Central Bank also highlighted that Brazil is one of the only countries that are having a positive review for economic growth this year. In his assessment, the gross domestic product (GDP) of the second quarter should be strong. But Campos Neto pondered, in line with the minutes of the Monetary Policy Committee (Copom) of June, that the expectation is of deceleration in the second half due to the monetary tightening.

Campos Neto also commented on the better-than-expected performance of the job market in Brazil. “Unemployment is much lower than before the pandemic. Brazil is generating more jobs,” he said, adding that income is lower than in the pre-pandemic period and that high inflation has eroded the purchasing power of the population.


At the same event, Roberto Campos Neto stated that several countries have taken measures to mitigate the energy crisis at a much higher fiscal cost than in Brazil, especially the countries that are more dependent on gas. For the BC president, Brazil is “not by far” one of the worst countries in terms of the energy problem. “It’s a global issue.”

According to Campos Neto, in the face of the food and energy crisis in the world, several countries have adopted the reduction of taxes on these products, something that the government of President Jair Bolsonaro has also done. Showing a table with measures in the euro zone, Campos Neto also said that all countries have also implemented policies for transferring resources to the most vulnerable classes.

“We see that where there is more doubt is about regulation of prices or actions via a state-owned company and something about profits. What is being adopted the most is the part of taxes or transference,” he said, without commenting on the discussions on the topic in Brazil.

In the assessment of the BC president, the energy and food crisis is rooted in the uncoordinated action of governments around the world to guarantee security in these two aspects for their population. “The disconnect between prices and production does not only happen with oil but with food. The desire to generate food and energy security is being uncoordinated.”

Campos Neto repeated that the global problems of inflation are still linked to the policies to face the covid-19 pandemic in the economic sphere, with the fiscal and monetary stimulus unprecedented in the world.

global recession

The president of the Central Bank also stated that the current big question in the world is whether a global recession will be faced. “Brazil is much closer to having done all the work, other countries are still in the midst of the interest rate hike process,” he said, citing inflationary memory and “more alive” indexation mechanisms in Brazil.

“We are going to see some countries raising interest rates a lot. We need to understand what the consequences will be for the world economy. Will we have a global recession? What kind of deceleration are we going to have? I think this is the most important question.”

Campos Neto commented that the policy adopted by the Federal Reserve (Fed, central bank of the United States) is currently more aggressive than was initially expected. He mentioned that the market already prices that American interest rates should reach a range of 3% to 3.5%, already approaching 4%. “We have an interpretation that the Fed had a wrong reading of inflation, now it’s correct,” he said. “For the first time, the market prices US interest at a level that controls inflation,” he added.

According to the BC president, global inflation started with energy and food shocks, but is already more widespread in several countries, although China is an exception, with a lower inflation rate, which should be evaluated. “BCs act in one way in the face of shocks and in another with more widespread inflation”, he pointed out.

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