Higher inflation target could be dangerous, says BTG Pactual

Raising the country’s inflation targets can be a dangerous path, said this Monday (13) the financial vice-president of BTG Pactual, Renato Cohn, reverberating the cautious view of banks in relation to discussions on the subject within the government.

According to him, internationally, the BC’s stance of having started to raise the country’s basic rate almost two years ago, from 2% to the current 13.75% per year, is well evaluated, given that the country managed to control inflation before the than other countries.

However, the BC’s weekly survey of financial institutions published this morning indicated a forecast that this year’s IPCA should rise 5.79%, exactly the same level as last year, but well above the center of the monetary authority’s target for 2023, of 3.25%.

Next Thursday, the CMN (National Monetary Council) will meet to discuss, among other topics, the inflation targets and members of the government have advocated raising the target to 3.5%.

According to Cohn, discussions on the inflation target must be based on technical foundations and different motivations can contaminate market expectations, with negative consequences for the macroeconomy.

For the executive, even with the still adverse environment in the country, Brazilian assets are of great interest from foreign investors. Thus, if the noise between the government and the Central Bank cools down, a more positive scenario in the market may form for companies in the country to raise funds in the market.

“Lowering the ball, there is a good chance of reopening the market,” said Cohn, referring to fixed income and equity issues, including initial offerings (IPO), which went unnoticed in 2022.