Study shows that ‘continuous’ inflation target, defended by Haddad, is more efficient, says president of the Central Bank

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Meeting of the National Monetary Council (CMN) may define this Thursday a change in the format of the Brazilian inflation targeting system. The matter will be discussed by Minister Fernando Haddad. The government’s economic team, formed by Haddad and Tebet, has a majority in the CMN. The president of the Central Bank, Roberto Campos Neto, said this Thursday (29) that a study by the institution showed that the adoption of a continuous inflation target, that is, different from the current format of setting a target for each year, ” It’s more efficient.” “In relation to whether it is continuous or not, we have already explained a work in 2017. There is this study that shows that the continuous target is more efficient. At some moments in history, the government was concerned about exceeding the target in a specific year and ended up taking measures at the end of the year that made that inflation drop in a timely manner and that generated an allocation of resources that was not the most efficient from an economic point of view. And most countries do not have a calendar-year target”, declared Campos Neto. The model currently adopted in the country is the calendar year. That is, the CMN sets an inflation target for each year. The continuous target, in turn, would not be limited to the period of a closed year. This Wednesday (28), the Minister of Finance, Fernando Haddad, that the National Monetary Council (CMN) will discuss at the next meeting, scheduled today, a possible change in the inflation target model. He has advocated that the goal be continuous. “[Vamos discutir] whether or not it is the case to make this decision about standardizing Brazil’s inflation targeting program in relation to the rest of the world, which is sui generis, only in Brazil and another country, I think Turkey, which uses target calendar”, said Haddad this Wednesday. The president of the Central Bank also stated that the definition of inflation targets is a prerogative of the government. [o Banco Central] meets the target and has operational autonomy, I have tried to help with experiences and technical studies”, he added. In addition to the Minister of Finance, Fernando Haddad, the National Monetary Council is composed of the Minister of Planning and Budget, Simone Tebet, and the president of the Bank Central, Roberto Campos Neto CMN decisions are taken by simple majority of votes, so an eventual change in the target model needs two out of three votes.

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