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Dialogue between Treasury and Central Bank is constant, says source

After Fernando Haddad’s criticism of the level of interest rates last week, the finance minister’s interlocutors told the column that the relationship with Roberto Campos Neto, president of the Central Bank, is one of “partnership and constant dialogue”.

According to reports made to CNN the economic team has sent the “maximum of information possible” so that the monetary authority is not taken by surprise with new measures that impact the economy.

The objective remains one of convergence between the fiscal policy, under the Treasury’s management, and the monetary policy, under the BC’s responsibility. A type of “forward guidance” to help Copom make its decisions.

This is a well-known tool that is widely used by central banks to anchor market expectations. In their official communication, BC directors have been warning that uncertainty about the new fiscal framework and the use of public banks generate uncertainty and may impact inflation.

Recently, Fernando Haddad called the economy’s basic rate “an anomaly out of the ordinary”. Last week, during the announcement of the new fiscal measures, the minister made a pun on the letter sent by the BC to justify non-compliance with the inflation target in 2022. “They sent the letter to talk about the target, this one here [o plano fiscal] it is our letter to them”.

Managers and economists heard by the column show discomfort with Haddad’s provocations. First, because the Central Bank is independent and, by criticizing the level of interest rates, the Minister of Finance creates an early situation of embarrassment in case the monetary authority needs to raise the Selic rate even more to control inflation.

The second concern is pragmatic, since the government will have to replace one of the main BC directors at the end of his term. The mandate of Bruno Serra, Director of Monetary Policy, ends on February 28th and will not be renewed. Sources told CNN that this matter will still be dealt with in due time between the government and Roberto Campos Neto. For the market, the choice will play an important role in signaling the conduct of the economy over the next four years.

Source: CNN Brasil

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