Panel SA: If it is to discuss the inflation target, let it be soon, says former BC director


Lula’s conflict with the Central Bank should cool down in the coming days, according to forecasts by Luiz Fernando Figueiredo, former director of the Central Bank and chairman of the board at Jive Investments.

He assesses that the signals given by ministers Fernando Haddad, Simone Tebet and Alexandre Padilha have helped to calm spirits, but the crisis has already left an impact.

Given the point reached, Figueiredo argues that the debate on revising the inflation target should be brought forward. “This discussion took on heat and a very large dimension. I think that waiting until June is counterproductive. If it is to be discussed, it is discussed now and defined now”, he says.

What was the result of this rhetorical escalation by Lula against BC during the week? The balance was an increase in inflation expectations, which makes the work of the Central Bank much more difficult and puts forward the possibility of a drop in interest rates.

To give you an idea, before the discussion on fiscal responsibility and the Central Bank, the market was already predicting a drop in interest rates between April and May, that is, two months from now. But that all changed, because expectations went up a lot. So the balance is a drop in confidence, fear and expectations of higher inflation and, most likely, a higher interest rate.

Is the boil supposed to subside in the next few weeks? My impression is that it should download. There was a nod from the Central Bank, from Roberto Campos himself in the minutes, saying that the fiscal adjustment helps to reduce inflation.

He had a conversation with minister Simone Tebet. Haddad recognized that the minutes were more sympathetic. I think that there is an attempt by Haddad, Simone Tebet, Alexandre Padilha to converge and lower this temperature. I think on Roberto Campos’ side, the same thing. Let’s see if a bridge is built to calm down, but it will depend on the posture of the president himself.

If the economic result of Lula’s speeches is so bad, what, in your opinion, would be the political objective? It’s very difficult to say. There is a rejection of everything that was done by the previous government, in various matters, in dealing with public banks, public companies, labor reform, even Social Security, the law of state-owned companies and so on.

Along the same lines, even though it was something done by Congress, that is, the Central Bank became formally independent through approval by Congress, Roberto Campos came from the previous government. So, it is yet another rejection of what comes from the previous government, even though the Central Bank has become a state agency and no longer a government agency. When it acquired independence, it became an entity like Judiciary, Armed Forces.

And what effect would the idea of ​​bringing forward the revision of the inflation target have? The normal process is that the June currency board meeting discusses the target two years ahead. Now, this discussion took on a very large dimension and heat.

I think waiting until June is counterproductive. If it is to be discussed, it is discussed now and defined now. Why wait until June? The agents will all be afraid of what lies ahead for another three or four months. As this discussion has reached the degree it has, I think it has to be discussed now. Defined and done.

If so, then perhaps he has achieved some practical purpose of influencing the Central Bank? Perhaps yes. Now, let’s remember that in the format we have in Brazil, the Central Bank complies with what was defined by the monetary council. So, if the currency board decides on 5% inflation, the Central Bank will pursue that. What it does have is the independence to pursue a goal defined by the monetary council, of which the Central Bank is one of three votes.

Questioning and pressure always had from all sides? How to deal with it? The formally independent Central Bank model is the model followed by all reasonable countries in the world, both first world and emerging countries. This is a framework that gives them freedom to do whatever they want, despite this or that pressure.

During my period at the Central Bank, Fernando Henrique gave us complete freedom. Neither he nor Minister Malan spoke about monetary policy at any point. Now, this was a freedom that was given, that is, at any moment it could be withdrawn.

For example, let’s imagine this same discussion without having an independent Central Bank, that is, questioning the target, the interest rate. Today, it is at 13.5%. It was going to be at 16% or 17%. The cost of rolling over the debt went up, but it would have gone up two or three times as much.

What is being said publicly is just not being followed because of the formalization of the Central Bank’s independence. A few years ago, I wrote an article about this in which I called the Monetary Responsibility Law. Politics goes one way or the other, it has interests, but this decision has to be technical. This does not mean that the Central Bank is right every time, but over time it is getting it right more often than not.


Chairman of the board of directors of Jive Investments and former director of the Central Bank (1999-2003), the economist has worked at institutions such as Banco BBA, Banco Nacional and JP Morgan. He was a founding partner of Mauá Capital and one of the founders of Gávea Investimentos.

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