Brazil Central Bank Vows to Do What’s Needed to Tame Prices
(Bloomberg) -- Brazilian policy makers will do whatever it takes to bring inflation expectations back to target despite a perceived deterioration in the country’s fiscal outlook, according to central bank President Roberto Campos Neto.
“Keeping inflation anchored is key at this moment, when we are facing consecutive inflationary shocks and it’s becoming difficult to model inflation,” Campos Neto said on Thursday at an online event organized by the national association of bars and restaurants.
The Brazilian real briefly trimmed losses while he spoke, but remained 0.1% weaker at 5.28 per dollar in afternoon trading.
Foreign investors are perceiving a deterioration in Brazil’s fiscal accounts, Campos Neto said, as spending pressures mount ahead of next year’s presidential election. His remarks echoed similar comments made by Monetary Policy Director Bruno Serra on Wednesday, and followed the central bank’s decision to step up the pace of monetary tightening last week.
The most severe drought in decades, along with higher commodity prices and an economic reopening is keeping inflation well above target in Brazil. Consumer prices jumped 8.99% in July from the year prior, higher than economists forecast. Analysts polled by the central bank estimate consumer prices to rise 6.88% in 2021 and 3.84% in 2022, above the targets of 3.75% and 3.5% for each year.
“We will use all the tools we have, as much as needed, to anchor inflation in the medium and long term,” Campos Neto said, adding that current inflationary shocks are contaminating expectations for next year.
After promising last week to raise interest rates above the so-called neutral level, the central banker said later on Thursday he still considers that point to be around 3% in real terms. Yet there’s an upward bias to that rate, which neither stimulates nor restricts the economy, when the most recent macroeconomic data is taken into account, he added.
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