BC President indicates a new increase in the Selic rate in September; Europe fears recession

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The speech of the president of the Central Bank (BC) last Monday (5) surprised. Like other chairmans around the world, Roberto Campos Neto was tougher in his speeches than in the official communications of the municipality, as he opposed what the Minister of Economy, Paulo Guedes, and President Jair Bolsonaro have been saying. (PL).

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According to him, inflation is still a point of concern, and the fact that Brazil started to raise interest rates before much of the world did not mean that the job was done. “We understand that inflation has had some recent improvement, but a large part was due to government measures. We will go through three months of deflation, most likely, but the battle is not won”, said the BC president.

What was seen as still open was practically confirmed last Monday: it is very likely that the Central Bank will raise the Selic to 14%, in what could be the last upward movement, at the next Copom meeting at the end of this month.

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Economists had already been discussing the need to continue raising interest rates even before Campos Neto’s declaration. Some say, for example, that the current inflation is due to a supply shock, caused by the soaring energy prices and bottlenecks in the supply chains. If that is the case, the view is that prices will not necessarily be controlled by raising interest rates, which reflects more on demand than on supply.

There are also those who defend Campos Neto’s view of continuing to raise the Selic rate, since the deflation seen in recent months is a consequence of measures adopted by the government, and the downward trend, in the future, may reverse. This Tuesday’s episode (6) of CNN Money reflects on the possible impacts of a further increase in the Selic rate; on the international scene, the focus is on the energy crisis in Europe and a recession that is becoming increasingly likely there.

Presented by Thais Herédia and Priscila Yazbek, CNN Money presents a balance of news issues that influence markets, finances and the direction of society and power dynamics in Brazil and worldwide.

*Posted by Tamara Nassif

Source: CNN Brasil

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