Inflation is less inertial and could change a lot over the next year, says BC director

The Director of Economic Policy at the Central Bank, Fábio Kanczuk, said this Tuesday (30) that the view of the monetary authority is that inflation is less inertial and could change a lot over the next year, in the sense that it could surprise down.

While participating virtually in an event promoted by JP Morgan, he also pointed out that the BC sees changes in expectations for the Gross Domestic Product (GDP) in 2022 less linked to monetary policy itself, and more connected to questions about the country’s potential growth .

According to Kanczuk, the big question at the BC is more related to the projection of inflation, and less to growth. He even added that monetary policy still would not have had time to affect activity.

“(The big question) is more related to the projection of inflation and not agreeing with the view that we have a very inertial phenomenon like what we had in the previous disinflation,” he said.

“Inflation is less inertial and could change a lot over the next year,” he added, speaking in English.

Kanczuk pointed out that changes in prospects for economic growth are not “a big deal” in the tradeoff issues analyzed by the BC.

“What’s a big deal, instead, is the question of what’s going to happen to inflation over the longer term,” he said.

“Now everyone is seeing inflation go up wildly. Okay. But we don’t see this as something very inertial”, he added.

Kanczuk justified that the significant increase in inflation was based on the advance in prices of industrial goods, food and fuel. But service inflation is still low and inertia is in this sector.

“We think that can change, so we can end up with a very tight monetary policy and then all of a sudden, I don’t know when, sometime next year, there’s a change and everything goes smoothly again in the supply chains. And then we will have industrial prices falling, fuel and food falling, and then inflation falls very quickly,” he said.