There is no debate to change inflation target, says Padilha – 09/02/2023 – Market

The Minister of Institutional Relations, Alexandre Padilha (PT), said this Thursday (9) that he is unaware of a government debate on changing the inflation target.

“I am not aware of any discussion in this regard within the government,” the minister told journalists in the Chamber of Deputies.

Padilha also stated that this type of matter is dealt with by the Minister of Finance, Fernando Haddad (PT). “From the meetings I had with the president of the Central Bank [Roberto Campos Neto]at no time was this brought to me,” he said.

The current targets are 3.25% in 2023 and 3% in 2024 and 2025, with tolerance margins of plus or minus 1.5 percentage points. President Luiz Inácio Lula da Silva (PT) created expectations about changes in numbers when he made statements last month, considering the percentages exaggeratedly low.

“You set an inflation target of 3.7%. When you do that, you have to tighten the economy more to reach that 3.7%. Why did you need to do 3.7%? Why not 4.5%, like We did [nos mandatos anteriores]? The Brazilian economy needs to grow again,” Lula told GloboNews on January 18.

In an interview with Sheet, the national president of the PT, Gleisi Hoffmann, said that the inflation target is “unfeasible”. In the view of the Lula government, it is also necessary to reduce interest rates —today the Selic is at the level of 13.75% per year.

Asked whether BC president Roberto Campos Neto’s decisions are taken in such a way as to deliberately undermine Lula’s political project, the petista replied: “I can only understand that it is a political decision, because it does not find support in the country’s economic reality. . It is an unattainable inflation target”.

News about the intention of the economic team to anticipate the review of inflation targets made the dollar rise against the real on Thursday. The central point of the debate is whether the eventual change would have the expected effects, since raising the target could convey the message of a more lenient government with price increases.

The inflation target is defined by the CMN (National Monetary Council), formed by ministers Fernando Haddad (Finance) and Simone Tebet (Planning and Budget) and by Campos Neto. Formally, the definition of the objective depends on the three votes.

In the CMN’s usual schedule, the topic is discussed at the June meetings, three years in advance. In 2023, for example, the forecast is to define the inflation target to be pursued in 2026 and ratify that of previous years. But the subject can be put up for discussion before June, if it is guided by one of the members of the collegiate.

The first meeting of the CMN is scheduled for February 16, after the January meeting was canceled due to the lack of resolutions to be evaluated or approved, according to the bodies involved. According to members of the economic team, the agenda has already been defined, without discussing inflation targets. However, nothing prevents the theme from being included.

Campos Neto has already said on previous occasions that a possible change in future targets is not a decision that rests with the monetary authority alone, emphasizing that a measure in this sense would not bring gains for action in the fight against inflation.

“The BC has 1 vote out of 3 for the CMN. This can be debated at the CNM, but the BC’s opinion today is that it would have little to gain in terms of credibility”, said the president of the monetary authority in March 2022.

Padilha also said this Thursday that there can be no “taboo” about inviting Campos Neto to give explanations to the National Congress about the interest rate.

He said that the president of the institution must be accountable. The minister, however, stated that the government does not interfere in congressional mobilizations to call him to the Legislature.

“The government, when it wants to talk to the president of the Central Bank, invites, dialogues”, said Padilha.

In recent days, Lula has been harshly criticizing the BC president. He said this week that the country’s current basic interest rate, the Selic, is a disgrace.

On February 1st, the Central Bank’s Copom (Monetary Policy Committee) maintained the basic interest rate at 13.75% per annum for the fourth consecutive meeting – the first since Lula took office.

The autarchy also signaled that it should leave interest rates at the current level for a longer time – the financial market had until then predicted the beginning of monetary easing in September.