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Fight between BC and government should heat up after tough messages in the Selic decision

The Central Bank (BC) decided, on Wednesday (22), to maintain the Selic rate at 13.75% pa once again.

The message in the statement, however, did not bring the restraint that the market expected, but a heavy tone about the uncertainties in the Brazilian economy, indicating that interest rates should not fall anytime soon.

The result is that, in the next 45 days, until the next meeting of the Monetary Policy Committee (Copom), the dispute between the authority and the federal government should heat up, each one defending what it considers to be the best for the country’s economy.

The BC strictly complies with the textbook of the inflation targeting system, which imposes high interest rates when expectations for price behavior are far from the target, as is the case now.

A former BC director once said that monetary policy is “70% art and 30% mathematics”. That is, even with the imposition of the system, it is the directors who choose the accommodation band for the effects of interest.

Central bankers’ literature reports that the preference is to err on the upside, because the cost of losing control over inflation is higher than tightening the current situation. Still, if the dose is too strong, the disorder can get worse beyond measure.

Roberto Campos Neto and the other directors of the autarchy decided to wait for more evidence about the intention of President Luiz Inácio Lula da Silva (PT) with public spending and about the intensity of the credit crunch, both here and abroad. And they literally paid for their independence from the government.

In this Thursday’s episode (23), the CNN Money still brings the repercussions of the 0.25 pp increase in US interest rates, promoted by the Federal Reserve last afternoon. The day still holds the decision of the BC of England, the Bank of England (BoE).

Presented by Thais Heredia, the CNN Money it presents a balance of the news subjects that influence markets, finances and the direction of society and the dynamics of power in Brazil and in the world.

*Posted by Tamara Nassif

Source: CNN Brasil

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