Campos Neto: Brazil’s structural growth is better – 12/01/2023 – Market

The president of the Central Bank, Roberto Campos Neto, said this Friday (1st) that he has noticed analyzes that point to an improvement in Brazil’s structural growth, and cited a cumulative pact of reforms that have been carried out in recent years on the activity economy of the country.

“We are starting to see some economists talking about changes in structural growth. And we can see some anecdotal examples of this. So, the opening and closing times of companies have improved, the hiring and firing part has improved. The speed has improved, the cost”, he said at a lunch organized by Febraban (Brazilian Federation of Banks).

According to the president of the Central Bank, everything suggests that structural growth is a little better, which means that there is a tendency for Brazil to advance further, with less inflation.

Campos Neto also drew attention to the fact that the relationship between the labor market and inflation is in a more favorable dynamic. “And then there is the issue of labor reform and several other things that are having an impact”, he pondered.

The president of the BC spoke of a synchronicity of fiscal and monetary credibility that makes the economic environment in the country more positive, citing the new fiscal framework of the team of the Minister of Finance, Fernando Haddad (PT).

On the monetary side, Campos Neto stated that the fact that Brazil took the lead with the cycle of rising interest rates contributed to inflation in the country remaining below the global trend, different from what usually happens historically.

He spoke again about creating a credible monetary policy in Brazil, so that the long interest curve rates do not rise and the country has an effect opposite to what was expected with the Selic cutting cycle.

Campos Neto reaffirmed that he believes that cuts of 50 basis points in the Selic are at an appropriate pace for the next Copom (Central Bank Monetary Policy Committee) meetings.

Currently, basic interest is 12.25% per year, after three consecutive reductions of 0.50 percentage points in the rate.

The BC president avoided presenting a perspective regarding the terminal Selic rate at the end of the interest rate cut cycle, but said he believes that the base rate needs to remain in a restrictive field, that is, at a high level enough to contain consumption and thus control inflation.

The banker said that prices in Brazil are qualitatively better, but still mentioned several variables that need to be analyzed meeting by meeting.

As for the law that established the Central Bank’s autonomy, he said that the inaugural test of autarky occurred when there was the first change of government after the law’s approval, citing a “natural noise”. According to the BC president, however, there were no setbacks in this process.

“Sometimes Brazilians get too caught up in short-term noise, but if we look at longer history, we have had several institutional improvements that remain, and will undergo improvements. The Central Bank itself now wants to make improvements in the autonomy process “, he stated.