Inflation: Haddad signals change in target period – 05/19/2023 – Market

The Minister of Finance, Fernando Haddad, again defended this Thursday (18) that the BC (Central Bank) start to pursue an inflation target unrelated to the calendar year and signaled that this change, to be made within the scope of the CMN (National Monetary Council), may occur at the June meeting of the collegiate.

“There is improvement to be done and maybe the opportunity is now”, said Haddad, during an interview with CNN’s program “Caminhos com Abilio Diniz”. The interview was recorded during the afternoon and aired in the evening.

Questioned about the possibility of changes in the inflation targets, defined by the CMN, the minister stated that Brazil is one of the two countries in the world that adopt the inflation targeting regime and that have the calendar year as horizon for meeting the objective. The other country is Turkey.

“Europe has a target of 2%. Until a month ago, they were celebrating the drop in inflation from 9% to 8.5%”, pointed out Haddad.

According to him, a target of 3% —as is the case with those established by the CMN for the years 2024 and 2025—needs to be continuous, and not limited to a calendar year.

Earlier this month, Haddad had already made an emphatic defense of changing the calendar to the inflation targeting regime, arguing that maintaining a continuous objective avoids disorganizing the economy at times when meeting the target imposes very high costs on the activity.

At the June meeting, the CMN will define the inflation target for 2026. The expectation is that the collegiate can also approve the change in the deadline for achieving the target. The possibility is not seen negatively by the financial market.

The CMN is formed by Haddad, by the president of the Central Bank, Roberto Campos Neto, and by the Minister of Planning and Budget, Simone Tebet.

TAX EXPENSES

Haddad also reaffirmed, during the interview, that the government’s intention is to cut a quarter of tax exemptions. According to him, the weight of these benefits, for public accounts, corresponds to about 6% of GDP (Gross Domestic Product).

“We are going to cut 1.5% of tax spending. We are going to review a quarter of tax spending. With that, even growing some expenses, such as the minimum wage, we are going to reach the primary result”, said Haddad, when asked if it is feasible to zero the primary deficit.

The minister also stated that Congress is “ready to vote on the tax reform”. According to Haddad, after the phase of reorganization of the State and public accounts, the government should enter, already in the second half of this year, in a medium and long term agenda, especially in themes related to the ecological transition.

Haddad said that the government has a set of 100 actions organized in the area of ​​ecological transition that will be launched by the end of President Lula’s term and that could draw the world’s attention to Brazil.