For its Central Bank president, Brazil did “reasonably well” in the biennium 2020-2021

RIO DE JANEIRO, BRAZIL – The president of the Central Bank (BC), Roberto Campos Neto, said Tuesday that Brazil did “reasonably well” in the biennium 2020-2021. In an event organized by the Brazilian Federation of Banks (Febraban), Campos Neto pointed out that most emerging peers are already close to the pre-pandemic level.

“When we add the years 2020-2021, Brazil did reasonably well, with a 4.1% drop, a much smaller drop than the average, a recovery, I would say, close to the average in 2021. And when we look at 2022, when we start to see the structural conditions for growth in the post-pandemic period, Brazil lags again and has had some downward revisions”, pondered Campos Neto.

During the event, the BC president said that the lowering of the benchmark interest rate, the Selic, to 2% a year in 2020 was justified given the uncertainties of the macroeconomic scenario at that time.

“We started a process of [interest rate] hikes; we even surprised in some meetings. I think it is important to understand that in 2020 we didn’t know what would happen,” he said during the presentation.

“We adjusted, we put a lot of money in circulation, and now we have made a new adjustment,” he said, without making any signals about future adjustments to the Selic.

In the communiqué of the last meeting, Copom signaled that it might raise the basic interest rate by another 1.5 percentage points in the next meeting of 2021. Today, the Selic is at 7.75% a year.

INFLATION

The president of the Central Bank also stated that although inflation in Brazil is the second-highest among emerging countries, the cores, excluding food and energy, are in line with the peers.

According to Campos Neto, energy inflation is a particular issue in the country, which was impacted by the increase in commodity prices amid a process of currency devaluation. According to the BC president, the recent increase in service prices in Brazil was expected in the wake of the reopening of the economy.

For Campos Neto, part of the global inflation problem is due to the assessment made worldwide that the pandemic would throw countries into a depression in 2020. He said that the response adopted globally, with substantial income transfers and monetary stimulus, caused this depression to be converted into a recession.

With the fiscal stimulus, the demand for goods was not reduced by the increase in demand for services with the reopening of the economy, said Campos Neto.