Inflation is under control, says BC director – 05/06/2023 – Market

Inflation is under control and the basic interest rate (Selic) will fall again at some point, said the Director of Relationship, Citizenship and Conduct Supervision of the BC (Central Bank), Mauricio Moura, in the debut of a weekly live promoted by institution whose objective is to bring the citizen closer to the themes of action of the autarchy.

“The interest rate will fall again at some point. The trend is that at some point it will go down, as soon as conditions allow it, it will fall,” he said.

Moura is one of the nine members of the Central Bank’s Copom (Monetary Policy Committee), a group that sets the Selic rate every 45 days.

The collegiate takes into account three factors when defining the direction of the interest rate, explained Moura. The first is current inflation, which according to him is under control.

The second is the expectation of future inflation. “Everyone predicts that inflation will rise a little by the end of the year and fall again in 2024”, he analyzed.

The third factor is the balance of risks, in which the BC lists the various factors that may help or hinder the body in meeting the inflation target.

The expectation of the government’s economic team, already voiced by the Ministers of Finance, Fernando Haddad (PT), and of Planning, Simone Tebet (MDB), is that this movement starts at the beginning of the second semester.

The interest rate, maintained at 13.75% since the beginning of the year, is the target of attacks by President Lula (PT), who would like it to start falling. For the president, the current rate harms the economy.

Moura countered this type of analysis by saying that the current rate will not asphyxiate the economy. “Nobody likes high interest rates, the Central Bank doesn’t like it either. We don’t do it because we like it, we do it because it’s a necessary condition to meet the goal”, he pondered.

“Inflation [alta] it’s much worse, it ruins the house, it increases poverty,” he added shortly thereafter.

That’s because, he explained, “high interest rates are temporary, predictable, the economy adjusts. If you don’t act quickly, inflation gets out of control and the remedy you’ll have to use is even higher interest rates.”

Moura also explained that the level of employment is taken into account in the decisions made by the Copom, also because this is a legal provision.

He used as an example the inflationary shocks caused by the Covid-19 pandemic and the war in Ukraine. “If we were to put the Selic there last year at the point it needed to reach the center of the target now, we would have to play very high, but it would be bad for the economy, employment. We put the Selic lower to accommodate shock,” he recalled.

Today’s broadcast, called LiveBC, was the first of a regular series that the monetary authority will promote every Monday, 2 pm, on its YouTube channel.