Worsening inflation expectations for 2024 bothers, says BC director

The director of Monetary Policy at the Central Bank, Bruno Serra, said this Tuesday (6th) that the worsening of the financial market’s perception of inflation in 2024 is a cause for discomfort and that the monetary authority needs to keep “with its guard up” ” in the coming quarters.

“When I look at the expectation for 2024, it bothers me. We are discouraged [se afastando] from the center of the goal [3%]”, said Serra in a live promoted by Bradesco Asset Management. “The Central Bank has to maintain a very cautious posture in the coming quarters, very vigilant”, he added.

According to the latest Focus bulletin, released by the BC on Monday (5), the median of the financial market for the IPCA (Broad Consumer Price Index) for 2024 went from 3.41% to 3.43%, against 3.30% a month ago.

The projection is above the center of the 3% target set by the CMN (National Monetary Council), with a tolerance of 1.5 percentage points up or down.

For the BC director, the market discussion about starting interest rate cuts “seems inconsistent” in the face of a scenario of inflation projection above the center of the objective for 2024.

Serra sees the process of controlling inflation in Brazil as still in its infancy, but projects a fall in inflation quite quickly by historical standards. According to him, it is necessary to be cautious in the decision to end the interest rate shock after the surprises that were imposed throughout the cycle of monetary tightening.

“We were already so surprised that we have to be very careful in the eventual closing of the cycle. Inflation is still close to double digits, helped by the drop in essential goods, but we still have a big challenge”, he said.

The decline in the inflation rate was driven by the drop in fuel prices, especially gasoline, and electricity after the tax cuts promoted by the government on the eve of the elections.

In August, the IPCA-15 (National Index of Consumer Prices Extended 15) had deflation of 0.73%. Despite the truce, the index still accumulated an advance of 9.60% in 12 months.

Serra also said that the BC will discuss at the next Copom (Monetary Policy Committee) meeting, on September 20 and 21, a residual increase in the basic interest rate. Currently, the Selic is set at 13.75% per year.