Arminio Fraga says he is in favor of maintaining the inflation target, but says that more time needs to be given to the Central Bank

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The economist also stated that President Lula had an ‘attack of amnesia’ for defending the revision of goals and for the PT’s recent criticism of the autarchy. Former Central Bank president Armínio Fraga said he was against a possible increase in inflation targets and said that the president, Luiz Inácio Lula da Silva (PT), had an “amnesia attack” for declaring himself in favor of this revision and by the recent criticisms leveled at the Central Bank (BC). In an interview given to Conecta, from GloboNews, the economist said that the current target of 3.25% for this year and 3% for 2024 are of “good size”, reiterating that the ideal would be “to maintain the target, but to give more time” for the Central Bank to reach it. See the full interview given by Fraga in the video below. Interview with Arminio Fraga “I believe that changing the goal would be worse. The Central Bank protocol recommends that, in the face of a complex scenario of shocks, especially costs, adjustments be made over time. This is what the Central Bank is signaling when it says that the monetary policy horizon has lengthened and is now in the third quarter of 2024,” he said. For Fraga, the fact that interest rates are very high and that inflation is not falling at the desired speed shows that “something is missing”. “First, from the point of view of short-term demand, there is a lack of help from the Treasury, from the Ministry of Economy. And secondly, we have a risk premium in which the Treasury pays 6.5% to raise [recursos] in an inflation-linked bond. Brazil has a large debt and, in my opinion, the idea that the government can borrow without limit is wrong and dangerous”, added the economist. Fraga also said that it is essential to define fiscal targets for the coming years. “I think this is more important than the design of a limit that can be full of nonsense and deviate from the basics. It is necessary to define what we are going to do in the next three or four years to stabilize this situation [da dívida]”, added the economist. discuss an increase in these targets. Recently, however, the Minister of Finance, Fernando Haddad, stated that the issue should not yet be evaluated by the collegiate. Tension between Lula and the Central Bank Another point addressed by Fraga concerns the recent criticisms made by the president Lula to the monetary policy conducted by the Central Bank. In addition to saying that the BC’s independence is “nonsense”, the PT also criticized the decision of the Monetary Policy Committee (Copom) to maintain the basic interest rate at 13.75% READ ALSO: What does the Central Bank do and why is Lula ‘at war’ with Campos Neto? Lula vs Central Bank: understand the president’s criticism and the effects of the ‘fight’ on the economy According to Fraga, “ doesn’t make the slightest sense o” that Lula is “promoting a small war” with the Central Bank. “I confess that I am very surprised by this movement [do presidente], since he promised during the campaign a high fiscal responsibility. I think he had an amnesia attack […]. And now it’s a bit strange because not only is he at odds with the Central Bank, but he’s promoting a small war at home, and that doesn’t help a bit”, said Fraga. The economist also stated that he “is not very optimistic” with the PT government and said that despite the social time being “urgent”, it is necessary to develop the country in the medium term, defining a path of “little risk and little uncertainty”. “At the moment I am not very optimistic, but I am hopeful. Brazil has the potential, but it’s been 40 years of mediocre growth and we can’t play around. I think we need to have a little humility, put our house in order and work on things that are fundamentally important, such as education, health, environment, innovation and economic stability. I think the opportunities are huge for us, but we have a habit of wasting them, unfortunately, ”he said.

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