Campos Neto: inflation targets are in line with those of other countries

The inflation target has a center and a tolerance band. For example, last year, the target was 3.5%, with a tolerance interval of 1.5 percentage points up or down, that is, a lower limit of 2% and an upper limit of 5%. However, the target was exceeded because inflation ended 2022 at 5.79%. For this year, the central target is 3.25%, with a tolerance of 1.5 percentage points.

Campos Neto’s statement was made this Thursday (27), in a debate session in the Senate plenary on interest rates, inflation and economic growth. “I see some questions, (according to which) the target system in Brazil is out of band for a long time. Is not true. He stayed most of the time in the band, with seven outbursts in 24 years”, said the president of the monetary authority.

“When we look at the situation in Chile, Colombia and Peru, which have similar targeting systems, the number of times the band burst was very similar to that of Brazil. Some other countries, obviously from the developed world, (the number was) a little bit lower,” he added.

According to Campos Neto, the Brazilian inflation target system has “a falling target”, which has been “half falling”, reaching 3% in 2024, he said, remembering that the target is determined by the government, with the Central Bank run it autonomously, in operational terms.

Also participating in the debate session were the Ministers of Finance, Fernando Haddad, and of Planning and Budget, Simone Tebet.

reasons

The BC president reiterated the defenses he makes of the target system. “Looking at the literature and studying the cases, we see that in some moments there was a detachment from the target system, for several reasons.”

“The most common ones, because they consider it more worthwhile to trade a little more inflation for growth. This is the most common reason for meta system detachment,” he said. “There is a second one, who believes that the inspector is not so relevant in this tripod of the target system, and that a slightly looser inspector can be tested. This was the case in England recently, where even the prime minister fell after this attempt. There was a quick market reaction, and then (the attempt) had to be aborted,” he added.

“And there are the cases of better-known emerging countries, such as Argentina and Turkey, which began to have a trade-off between inflation and growth, with the view that you can have higher inflation and then grow. At the end of the day, there is more inflation and less growth,” he added.

*Collaborated by Kelly Oliveira