Inflation decline is slower than expected and ‘battle’ has not been won, says BC president

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IPCA closed March with an increase of 0.71% and accumulated in 12 months was 4.65%, the lowest since 2021. The president of the Central Bank, Roberto Campos Neto, said this Wednesday (19) that he assesses that inflation in the Brazil has been falling more slowly than expected – even with the basic interest rate in the economy at a high level. Considered the country’s official inflation, the Extended National Consumer Price Index (IPCA) closed March at an increase of 0.71% and accumulated 4.65% in 12 months, the lowest since 2021. The percentages were well received by the market and resulted in movements such as the drop in the dollar and the rise in the São Paulo Stock Exchange. The scenario, however, still inspires caution according to the Central Bank’s assessment. “We looked at a lot of things and crossed a lot of data. But the reality is that the fall in inflation is slower than we expected, considering the level of the real interest rate in Brazil. Which tells us that the battle has not been won and we have to persist “, declared Campos Neto in a conference with international investors. The BC president was asked by an investor about the reason for the Central Bank to take into account the expectations of specialists that point to higher future inflation – and, supposedly, not to take into account current market data that indicate a more favorable trajectory. According to Campos Neto, the Central Bank’s assessment is that the lowest accumulated inflation currently recorded is still “contaminated” by the measures adopted by the Jair Bolsonaro government in 2022, during the election period, to temporarily combat inflation. “The raw inflation index is ‘polluted’ by changes in the taxation of gasoline, energy and gas. When we look at the core of inflation, it is slightly below 8%, which is very high. […] When we talk about expectations, we need 6 to 12 months for the decision-making to mature.”, he said. “The fact that projected inflation is above the target is a warning sign that we need to look at the issue more closely”, New fiscal rule Campos Neto also commented briefly, at the conference with investors, the submission of the government’s proposal for new fiscal rules to Congress this Tuesday (18). the primary surplus (that is, for the difference between what the government collects and what the government spends, without considering the costs of the public debt). “I think that is a good indication that we are moving in the right direction. It removes the risk that I saw in some projections out there, that the debt went to 100% [do PIB] very quickly”, said the president of the Central Bank.

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