Brazil’s Inflation Spike Is ‘Temporary’, Says Central Bank President Campos Neto
RIO DE JANEIRO, BRAZIL – Brazil’s recent spike in inflation is temporary, central bank President Roberto Campos Neto said, adding, however, that policymakers are monitoring developments closely.
In an interview with online personal finance channel Me Poupe, Campos Neto said financial markets are flashing red and that rising long-term interest rates and a steepening yield curve show investors are worried about growing fiscal risks.
He also said the central bank autonomy bill being debated in congress will separate the monetary policy and political cycles. All else being equal, greater credibility in the central bank will help reduce long-term rates and keep inflation under control.
“We think that inflation is temporary, but we are obviously monitoring it,” Campos Neto said, citing a weak exchange rate, rising food and commodity prices and consumer demand resulting from emergency aid to the poor.
Last week, the central bank kept interest rates at a record low 2% and said inflation expectations and baseline projections remain significantly below target and well-anchored.
The minutes of that meeting released on Tuesday showed that policymakers could revise their “forward guidance” pledge to keep rates low for a long time if the fiscal situation deteriorates and alters the country’s debt path.
Campos Neto also said that Brazil’s new “PIX” instant payments system will help the broader economic recovery as it will make it easier for consumers to pay for goods and services and open the flow of money in the economy.
More than 60 million people have signed up to “PIX”, according to central bank officials. It went live this week and will go into full operation on Nov. 16, allowing people to make bank transfers 24 hours a day, without charge.
Campos Neto said many small and medium-sized banks have signed up to it, as well as large banks, which will encourage greater competition among financial institutions.
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