Galípolo says that booming employment and economy could make disinflation slow – 04/04/2024 – Market

The director of Monetary Policy at the Central Bank, Gabriel Galípolo, stated that the heated job market and greater economic activity could make the disinflation process “slower”.

Galípolo was questioned by employees of Necton Investimentos, on Thursday night (4), during an event in São Paulo. This warning from the director was recorded in the minutes of the Copom (Monetary Policy Committee), released at the end of March, when the BC lowered the Selic rate to 10.75% per year.

“The minutes record a fact that is difficult to dispute: there is a relatively tight labor market and slightly higher inflation in services,” said Galípolo.

“We recognize that the warmer labor market and greater economic activity still do not establish a clear link to a process of economic heating and that represents a reversal of the disinflation trajectory. The tighter labor market and stronger activity could mean a slower disinflation process”, stated the BC director.

For him, the minutes were as accurate as possible. According to him, the text was “humble” for making it clear that the Copom does not have the entire scenario clear and left open different possibilities for the near future. Less in inflation. “The vocabulary in no way wants to make the goal more flexible. The goal is 3 [porcento].”

Succession to the presidency of the BC

Tipped to command the Central Bank from next year, Galípolo believes that the current president, Roberto Campos Neto, referred to a “bureaucratic process” when asking that the person chosen to replace him be questioned by Congress this year.

“It would be good to do the hearing this year. If a director is interim president, he has to go through the hearing too,” said Campos Neto at a Bradesco BBI event in São Paulo, this Wednesday (3).

Galípolo said that the emphasis given to the request to advance the succession process at the BC was excessive. “When Roberto said this, he was warning of a technical and operational issue. This demand that the hearing take place this year. I don’t see this as advancing, I see it as adequate timing for the appointment of the future president”, he stated.

Fernando Haddad’s appointment to the BC, he was executive secretary of the Ministry of Finance and is one of two directors of the institution tipped to preside over it from 2025. The other is Paulo Picchetti, director of International Affairs.

When asked about Campos Neto’s succession, Galípolo hesitated.

“It’s not up to me to occupy my mind with that. I already have [a meta da] inflation to worry about. This is a topic for the President of the Republic. I can’t corroborate what’s happening [a escolha do novo presidente]. Roberto was warning about the bureaucratic process. I spent six months at the Treasury saying that there was only one guy with 60 million votes. At the Central Bank, I say that there is still only one guy with 60 million votes,” he said, referring to President Luiz Inácio Lula da Silva (PT).

Since the beginning of his term, in 2023, Lula has been at odds with Campos Neto. He complains that the Central Bank has been very resistant in cutting interest rates.