The Central Bank (BC) is ready to raise interest rates more than expected if inflation is higher or more persistent than expected, said the body’s president, Roberto Campos Neto. On a trip to the United States, he repeated that the Monetary Policy Committee (Copom) should raise the Selic rate (basic interest rates for the economy) to 12.75% per year at the next meeting, in May, but hinted that additional adjustments could to occur.
“The Copom assesses that the moment requires serenity to assess the size and duration of current shocks. [O comitê] will persist in its strategy until the disinflation process and the anchoring of expectations around its goals are consolidated”, declared Campos Neto in a presentation to investors.
With official inflation by the National Consumer Price Index (IPCA) at the highest level since 1994, Campos Neto repeated recent statements that the BC is open to reviewing the monetary policy scenario. Originally, it was expected that the Copom would raise interest rates from the current 11.75% per annum to 12.75% per annum in the next month. With the persistence of inflation, an additional increase is not ruled out for the Copom meeting in June.
“The Copom emphasizes that its future monetary policy steps may be adjusted to ensure the convergence of inflation to its targets and will depend on the evolution of economic activity, the balance of risks and inflation expectations and projections for the horizon relevant to monetary policy” , added Campos Neto, who is in Washington for meetings of the International Monetary Fund (IMF), the World Bank and the G20 (group of the 20 largest economies on the planet).
War
In the presentation, released to journalists, Campos Neto said that the war between Russia and Ukraine could exacerbate pressures on inflation across the planet. According to him, prices are subject to suffering effects, both developed and developing countries are suffering from the economic impacts of the conflict.
According to him, the war can delay the transition to a green economy. This is because several countries have to resort to fossil fuels in the short term to supply the lack of Russian natural gas and the scarcity of oil-dependent inputs, such as fertilizers.
