Campos Neto sees stronger growth in the first quarter – 02/06/2024 – Market

The president of the Central Bank, Roberto Campos Neto, stated that inflation in Brazil has fallen “more or less” in line with the institution’s expectations, despite prices in the services sector showing more resistance, as shown by the most recent data from the IPCA (IBGE consumer price index).

Campos Neto also said that the financial market has been wrong in its economic growth forecasts for three years and that data from this beginning of the year should surprise upwards, also driven by the services sector.

“Looking at the growth perspective for the first quarter, it looks like it will surprise upwards. This is our first intuition there at the Central Bank, looking at the highest frequency data. We see services driving growth a lot”, stated the president from the BC during an event held by the BTG Pactual bank this Tuesday (6).

According to him, there is a debate whether the positive surprises in economic growth in recent years are linked to the effect of reforms carried out in the past. “I think there is [relação]. I think it’s difficult to say that it’s just the effect of a bigger transfer program or something like that.”

Campos Neto stated that the job market also continues to surprise positively and that inflation data shows greater pressure on goods and services in more labor-intensive sectors.

The BC president also highlighted that the government’s confirmation of the 3% inflation target for the coming years was a milestone that helped reduce market expectations for the price index.

He also cited a drop in implicit inflation expectations in longer terms, which, according to him, undermines the argument that there is a risk of a change of team at the Central Bank. Campos Neto will leave the BC presidency at the end of this year, after six years in office, and will be replaced by someone appointed by Lula.

Regarding the basic interest rate, which was cut last week to 11.25% per year, Campos Neto said that the real rate is above that seen in the developed world, but with a smaller difference than in the past, in addition to being in line with what is happening today in emerging markets.

He also highlighted the data that measures monetary effort, which is the difference between the real interest rate and the equilibrium rate, the one that generates neither inflation nor deflation. According to him, Brazil is once again in a position above advanced economies, but, in relation to emerging economies, it is the lowest rate that exists in Latin America.

This Tuesday, the BC released the minutes of the Copom (Monetary Policy Committee), in which the institution highlighted that the domestic scenario has evolved as expected by the BC, with relevant disinflationary progress, but that international uncertainty prescribes caution for monetary policy , stressing that there is still a long way to go in returning inflation to the target.