The worst of inflation in Brazil is over, says Central Bank president

RIO DE JANEIRO, BRAZIL – The president of the Brazilian Central Bank (BC), Roberto Campos Neto, said on Monday, June 27, that “the worst of inflation in Brazil is over” and that “much of the work has been done” about monetary tightening. The evaluation was made during the X Legal Forum of Lisbon in Portugal.

“We still have a component of acceleration [of inflation] in Brazil. The last two numbers were, for the first time, within expectations; we think that the worst of inflation in Brazil is over. We have some measures being designed by the government that we need to understand what the effect of this will be on the inflationary process; it is not clear yet,” he said.

“But it is important to say that Brazil did the due process; we believe our tool can curb the inflationary process, and it will. We believe that a great part of the work has already been done,” he added.

BRAZIL IS AT THE ADVANTAGE

Campos Neto also affirmed that Brazilian inflation has always been above developed countries and is currently within the historical average of the last 20 years.

In a presentation at the X Legal Forum in Lisbon, Portugal, Campos showed a graph with the difference in Brazilian inflation compared to the average in the developed world.

“Brazil has almost always worked with an inflation average above the developed world [in the last 20 years]. Unlike the inflationary process of 2013, 2014, and 2015, when Brazil’s inflation grew well above the world average, this inflation of ours is even relatively below the historical median,” he said.

“This inflation has a strong global component and shows that Brazil is in the average of what it has always been in the last 20 years,” he assessed.

“It is obvious that we have to fight inflation, we are not going to look at what is happening outside and use this as any kind of excuse, but it is important to know the components,” he added.

Campos also commented on a global study showing that companies have increased salaries and employee benefits.

“There is an important issue for inflation, whether it is going to be persistent or not, which is whether I am indexing salaries. We are starting to see this process, we are not seeing it in Brazil yet, but we see big contamination in salaries [in the world],” he pointed out.

GROWTH

Campos Neto also affirmed that Brazil is one of the few countries with an upward revision of economic growth. He pointed out that recently the monetary authority raised from 1% to 1.7% the projection for the increase in Gross Domestic Product (GDP) this year.

“Brazil has growth revision upwards, unemployment revision downwards, and credit revision upwards; why is this happening? Partly because we have started to do the work from the beginning, partly because the short-term fiscal numbers are coming in better, and partly because we are managing to communicate the actions being taken to stimulate credit. So we see a very reasonable credit balance, but with defaults still quite low,” he analyzed.

About the fiscal improvement, he said that “obviously part of it is inflation, part was the freezing of the civil service, but there is a big part that is the government stopping spending, and the ceiling played a fundamental role”.

With information from Valor Investe

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