O central bank released earlier the minutes of the Monetary Policy Committee meeting (Copom) and presented a slightly softer text than that seen in the rate maintenance announcement Selic at 13.75% per annum.
Even so, the monetary authority continues to say that it will assess whether the strategy of maintaining the basic interest rate fees for a prolonged period will be able to ensure the convergence of the inflation and who will not hesitate to resume the tightening cycle if necessary.
Almost like a call for a truce, the Central Bank reinforced that “harmony between monetary and fiscal policies reduces distortions, reduces uncertainty, facilitates the disinflation process and encourages full employment over time.”
It is worth remembering that at the beginning of the year, the president Luiz Inacio Lula da Silva declared war against the Central Bank, questioning the level of Selic, the autonomy of the monetary authority and the loyalty of the president Roberto Campos Neto.
- Join Money Times Telegram!
Access the news that enriches your day in real time, from the economic and investment markets to relevant topics in Brazil and the world. Click here and take part!
The monetary authority also praised the work of the Ministry of Finance in trying to control public accounts.
“The Committee evaluates that the commitment to the implementation of the fiscal package demonstrated by the Ministry of Finance, and already identified in the fiscal statistics and in the reencumbrance of the fuelsmitigates fiscal stimuli on demand, reducing the risk of high inflation in the short term”, says the minutes.
In addition, he highlighted that he will continue to monitor the design, processing and implementation of the tax framework which will be presented by the Government and voted on in the Congress. “The materialization of a scenario with a solid and credible fiscal framework can lead to a more benign disinflationary process”.
For Marco Caruso, chief economist at the Original Bankthe Central Bank points out that it is not only following the debates on the new fiscal rule, but also how it should be processed in the Congress.
“It is one thing what the Treasury takes to Congress, another thing is what will come out of Congress. He points out that not only is there still uncertainty that nothing is concrete, but it is also known what will come out in the end”, says Caruso.
Central Bank x credit market
The Copom minutes were also a way for the Central Bank to give the government a slight ear tug in relation to the granting of credit.
“The tightening of concessions of credit it was more intense than expected, but focused on a few specific markets. The Committee assesses that the Central Bank has the appropriate and necessary liquidity instruments, linked to the macroprudential policy, to address relevant frictions located in the system, if they occur”, says the text.
Étore Sanchez, chief economist at Activate Investmentsstates that the Central Bank pointed out the risks regarding the importance of market interest rates remaining sensitive to the basic rate.
“I consider that this is a brief nod to some actions regarding the payroll interest of the INSS and the participation of other banks, such as BNDES, aiming at subsidizing credit, contrary to the Selic restriction. Along these lines, the authority shed light on the debate on neutral interest rates and the role that the parafiscal can have on monetary policy, reducing its power,” he says.
Check out the Copom minutes in full
Source: Moneytimes
I am an author and journalist with a focus on market news. I have worked for a global news website for the past two years, writing articles on a range of topics relating to the stock market. My work has been published in international publications and I have delivered talks at both academic institutions and business conferences around the world.
