BC predicts return of fuel taxes with Lula 3

The tax cut promoted by the government, which contributed to the drop in fuel price indices in recent months, should be reversed by the Lula government from 2023, making it difficult to meet the inflation target next year, according to the baseline scenario. of the BC (Central Bank).

The current government measure that reduces the rates of the Contribution for Intervention in the Economic Domain (Cide) and PIS/Cofins on these products to zero is valid only until December 31, 2022.

“There is still some risk of a tax increase next year. The Central Bank’s base scenario is still reversal, [com] return of the tax for 2023 on fuels in the case of the federal tax”, said Bruno Serra, director of economic policy at BC, during an event promoted by Bradesco’s fund manager this Friday (4).

“The challenge for disinflation is still big ahead, cores still running at 10% in 12 months.”

According to the director of the monetary authority, in order to reach the inflation target of 3.25% for 2023, and 3% for 2024, it is necessary to deflate prices in the services sector, which today run at a level of around 8% per year. year.

“If we want to have inflation anchored to the 3% target starting in 2024, we need to deflate services. 8.5% [de inflação] of services is not consistent with the 3% target. We need to bring services back to what it was in the pre-pandemic “, said Serra. “This is perhaps a tougher challenge.”

He added that the job market in the country is in a “much tighter” stage than in the pre-pandemic period, which ends up making it difficult to decompress inflationary pressure in the service sector more consistently.

The BC director mentioned a current debate in the market, according to which the labor reform approved in 2017 under Michel Temer would have contributed to lower unemployment in a more structural way in the country.

In any case, he also stated that the cycle of monetary tightening promoted by the BC, which took the Selic rate from the historic low of 2% per year to the current 13.75%, is already starting to have an effect, with a slowdown in the credit to individuals and legal entities.

“We see that the monetary policy cycle is hitting [na economia]and from now on we expect to relax activity and see this inflation converging towards the targets, especially from the first, second quarter of 2024 onwards”, said the BC director, who preferred not to comment on the impact of the fiscal risk for 2023 for monetary policy.

“The Central Bank avoids talking about fiscal policy, even more so at a time of government transition. It doesn’t have all the information, I think it’s not the case to be specific.”