Maintaining inflation targeting system would help the government, says economist

For Gabriel Leal de Barros, chief economist at Ryo Asset, the National Monetary Council (CMN) should not replace the current regime of inflation targets per calendar year for a model with a longer measurement horizon or continuous pursuit. Market analysts consider the chances of the change being approved at the next meeting of the body, scheduled for the 29th, to be great.

“By not making changes, the government itself would benefit”, says Leal de Barros, who was once director of the Independent Fiscal Institution (IFI). “Inflation expectations are higher, and interest rates are higher on the curve, because the market put the risk of some change in the price. If there is not, there is a tendency to reduce the implicit inflation in the curve”, he explains.

“For the government, which wants interest rates to fall so badly, this should be the optimal strategy: make no changes at all. But we have already seen several decisions that the government has taken that are not rational”, evaluates the economist. “As it is very obvious that doing nothing is the best thing, but this issue remains on the table, the government sends a signal that it still has a hidden interest in making some change”.