‘Changing the inflation target now will have the opposite effect to the desired one’, says Campos Neto


The president of the Central Bank, Roberto Campos Neto, said this Monday (13) that the monetary authority disagrees with a change in inflation targets and that a review of the targets to be pursued by the institution at this time would have the opposite effect to the desired one on the interest.

Campos Neto also signaled the need to have good will with the government of Luiz Inácio Lula da Silva (PT) and said that he will do everything in his power to bring the BC closer to the PT administration.

“If we make a change now, without an environment of tranquility and an environment where we are reaching the goal easily, what will happen is that you will have an effect contrary to the desired one. Instead of gaining flexibility, you can end up losing flexibility”, he said in the program Roda Viva, on TV Cultura.

For Campos Neto, there is no gain in credibility with the revision of goals in the current context. “At the end of the day, you will have an inflation expectation that not only goes towards the new target but also earns a premium [de risco] bigger,” he added.

The BC president said that he discussed with the government’s economic portfolio studies conducted by the monetary authority’s technical team over the years and defended an “improvement” of the system, without giving details, claiming it to be a “sensitive topic, which affects the market “.

The expectation about a change in inflation targets was generated by an interview with Lula, who considered current levels exaggerated and defended 4.5%, the same level set in his first two terms.

The current targets are 3.25% in 2023 and 3% in 2024 and 2025, with tolerance margins of plus or minus 1.5 percentage points.

The inflation target is defined by the CMN (National Monetary Council), formed by ministers Fernando Haddad (Finance) and Simone Tebet (Planning and Budget), as well as Campos Neto.

The first meeting of the CMN under the Lula government is scheduled for Thursday (16). So far, the discussion of goals is not on the agenda. Nothing prevents the theme from being included.

In 2023, the forecast is to define the inflation target to be pursued in 2026 and confirm the targets of previous years. Technically, to change the targets already set, the government will need to edit a decree authorizing this change.

The debate was opened while the inflation projected by the financial market for 2023 in the Focus bulletin is at 5.79%, more than one percentage point above the target ceiling to be pursued by the BC (4.75%). This would represent overshooting the target for the third consecutive year. Inflation was above the ceiling in both 2021 and 2022.

For 2024, market expectations for the IPCA (Ample National Consumer Price Index) rose to 4% – already above the central target (3%).

In addition to positioning himself against a change in the target today, Campos Neto stated that he did not want to support a proposal in Congress that would help him in the discussion and that would make such a change demand unanimity of votes in the CMN (today only a simple majority is needed).

‘It’s important not to change rules in the middle of the game’

“We have to understand that the existing framework was voted into law, it works and is being tested. It is the first time that autonomy is being tested. And it is important not to have rule changes in the middle of the game, not even to one side and nor for another. I have to be consistent with what I believe in terms of framework”, he said. “What matters is maintaining the stability of the framework and improving it over time,” he said.

With the fear that high interest rates (today the basic rate, Selic, is at 13.75% per year) will compromise economic growth, Lula has been criticizing the Central Bank and defending the change in targets with the official justification that this would open space to anticipate the beginning of interest rate cuts and encourage activity.

Campos Neto said he understood that Lula was in a hurry with the social agenda and signaled the president. “The BC needs to work together with the government. I’m going to do everything in my power to bring the BC closer to the government”, he said.

“It is important to recognize the legitimacy of the results of the elections, of the election of President Lula, which was carried out in a democratic manner. The Central Bank is a State institution, it must always work with the government”.

This Monday, the PT’s national directory approved an orientation for Campos Neto to be called by the party’s benches to explain, in the National Congress, the BC’s monetary policy. The head of the municipality said that he is open to appearing and that it is his “obligation” to provide this type of clarification.

The BC president also defended the institution’s formal autonomy. “Hope [autonomia] is not reversed, it has nothing to do with me, it has to do with the BC institution”.

The current law, in force since 2021, provides for “technical, operational, administrative and financial autonomy” for the institution. The text establishes fixed terms of four years for the president and directors of the institution, which do not coincide with that of the President of the Republic. Board members can be reappointed to office only once.

‘BC did not consider current government more spender in its communications’

Despite the BC having doubled the references to the fiscal area in its minutes after Lula’s election, the president of the monetary authority stated that the institution did not consider in its communications the current government to be more spendthrift than the previous one. He also said that Copom’s messages were not of a political nature, but of a technical nature.

“The difficulty of controlling expenses is in several governments. At no time is there an opinion that the PT government is more spendthrift or will have indiscipline, that does not exist”, he affirmed.

He also referred to the Executive’s “effort” to devise a new fiscal rule that will replace the spending ceiling, saying that it should bring positive results. “Including this is another government effort that should bear fruit, which is to eliminate this uncertainty about what the next fiscal framework will be. It is important to have a fiscal framework, to have a rule,” he said.

Campos Neto granted the interview after suffering a series of attacks from Lula, who called interest rates a “shame”, the BC’s autonomy “nonsense” and referred to the president of the BC as “this citizen”.

The government’s criticism of Campos Neto was accentuated after an image captured by the Sheet Gabriela Biló, on January 10, showing that he was still a member of a WhatsApp group called “Ministers Bolsonaro”.

After the image of Senator Ciro Nogueira’s (former Civil House) cell phone screen was made public, Campos Neto left the group.

In the interview, he justified his presence in the group by saying that he had a more informative participation and that he made friends in the previous government. He also said that he hopes to make friends in the new government in the next two years of his term, which runs until 2024.

During the Bolsonaro government, he attended get-togethers alongside other supporters. In 2021, he went to a barbecue at the house of the then Minister Fábio Faria (Communications).

He also developed close ties with Tarcísio de Freitas, former Minister of Infrastructure in the Bolsonaro government. On January 1, he made a “back and forth” between Brasília and São Paulo to participate in the inauguration of his former colleague from Esplanada, elected governor of São Paulo.

Asked if he was wearing the shirt of the Brazilian national team – a symbol associated with Bolsonaro supporters – when he went to vote in the second round of the elections, in São Paulo, Campos Neto refused to say. “Voting is a private act,” he said. “I tried to differentiate what is private life, what is public life”. According to him, several examples show that he always acted with autonomy.

‘Americanas provoked a hiccup [no crédito]’

As for the Americanas crisis, the BC president said that there was “a hiccup arising from the theme” and that the case had little effect on the willingness of banks to grant credit.

“When the bank discovers a hole of this size, the bank’s first reaction is to go to the credit department and say ‘we are going to review all our rules, we are going to revisit our whole way of giving credit’. This is actually happening and, when happens, you have a temporary stop”, he commented.

He, however, considers that the problem is not structural. “It doesn’t affect the product, nor does it affect the way we see credit.”

Regarding the BC’s role in inspecting gold extracted from mining, Campos Neto stated that “he would like to monitor and regulate this much better”.

The presumption of good faith is the main instrument for “heating up” illicit gold in Brazil. Today, with Law No. 12,844, the ore seller’s word is enough to attest that the origin of the gold is legal. The buyer assumes that he is telling the truth, and will not be punished if the contrary is proven one day. In practice, however, this law limits BC’s inspection of financial institutions accredited to operate with gold.

As shown to Sheet, the DTVMs (Title and Securities Distributors) are a fundamental link in the chain of legalization of gold taken from indigenous lands and reserve areas. It is in these companies that the illegal prospector can present a forged mining permit and leave with the invoice that makes the product legal to be transported and traded.

The BC said, in a statement sent to the STF (Federal Supreme Court), that it is discussing, together with other public bodies, a new inspection system that allows the traceability of gold extracted from mining. The model under study includes the “adoption of electronic invoices for the first purchases of gold, which would allow the supervision of this activity”.

“If you add an electronic invoice with the removal of this law [da boa-fé]with the improvement in traceability, we solve a large part of the problem, that’s what we need to work on”, said Campos Neto.

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