Campos Neto sees politicization of Copom’s language – 03/30/2023 – Market

Amid the pressure to reduce interest rates, the president of the Central Bank, Roberto Campos Neto, countered this Thursday (30) the criticisms of the Luiz Inácio Lula da Silva (PT) government, saying that the work of the monetary authority is “purely technical ” and that has seen a politicization of the language used by the Copom (Monetary Policy Committee).

On Wednesday of last week (22), the Copom maintained the base rate (Selic) at 13.75% per annum – the highest level since the end of 2016. The tone of the statement released shortly after the meeting was classified by the minister Fernando Haddad (Finance) as “very worrying” and criticized by other high-ranking members of the government.

“More recently we have begun to see a politicization of what is a very technical language in the Copom minutes. [eles] see in terms of communication history, every time we change a word, it has meaning”, said Campos Neto.

In the text of the last communiqué, the BC collegiate kept the message in the final paragraph signaling that it could raise interest rates again in the face of a worsening inflationary scenario. “The Committee emphasizes that future monetary policy steps can be adjusted and will not hesitate to resume the adjustment cycle if the disinflation process does not go as expected,” he wrote.

Campos Neto pointed out that the last section had been in the communiqué since September, before the elections. “It is a paragraph that reduces this asymmetry of expectations when there is a situation in which you are not reaching the target. Since then, our projections have worsened, and expectations have become more unanchored”, he said.

“It would be very unusual, given that our projections have worsened, for us to remove a paragraph that says exactly that we are committed to achieving the goal”, he added.

In reaction to the criticism he has received from the government, the BC president stated that the institution is “a technical body and should not get involved in political issues” and showed willingness to be more transparent about the work carried out by the monetary authority.

In its latest communications, the BC has adopted a more didactic tone when justifying the reasons why it chose to keep interest rates high at the current level for the fifth consecutive time – the second under the Lula government.

“What we can do is communicate in the best possible way how our work is done, be as transparent as possible in the technical aspect, open up as much modeling as possible, talk about the considerations we have on how we monitor each variable”, he said. .

‘Haddad is very well intentioned’

Campos Neto also said he has a good relationship with the Ministry of Finance and “conviction” that Haddad “has very good intentions”.

“We have been working together, I would say that on our side, we are doing technical work, we need to explain to society that this technical work has a cost in the short term, but that not doing it has a much higher cost and show the advantages of having inflation under control from the social point of view,” he said.

According to the BC president, it would be necessary to raise interest rates to 26.5% per annum if the monetary authority did not carry out a process of “softening” compliance with the inflation target. In the quarterly inflation report, released this Thursday, the BC admitted that the probability of the index being above the target ceiling this year is 83%.

“If the (inflation) target were to be reached in 2023, the last information I had is that the (interest) rate would have to be 26.5%. It is obvious that we understand that this would be impossible”, he said.