March inflation was a surprise and we will analyze the scenario, says BC president

The president of the Central Bank, Roberto Campos Neto, admitted surprise in the March inflation result. According to him, the BC will still analyze the number and communicate the monetary authority’s assessment of inflationary pressure.

“It was a surprise that, curiously, took place in several countries. We will analyze the factors that are generating these inflationary surprises and we will communicate this at the most appropriate time”, he said this Monday (11), at an event promoted by Arko and Traders Club.

Also according to him, before new monetary policy moves, the BC is “always reopened” to analyze the most recent scenario and how it differs from the previous assessment.

In his assessment, however, much of the interest rate hike in recent months has not yet been felt. “We think it will still have a strong impact in the coming quarters. We have a lag in relation to what was done”, he pondered.

Exchange softened

Campos Neto also highlighted the role of the exchange rate to mitigate food inflation in Brazil. In his view, the fall in the Dollar and the appreciation of the Real held and even reduced the price of grains domestically.

“When we take the price of grains in the local currency, it is stable or falling. The exchange rate more than offset this movement of commodities on the food side,” he commented.

He noted, however, that on the fuel side, the price increase was too high and the appreciation of the local currency was not enough. “More than the surprise of the number (IPCA) itself was the acceleration in the passage of the price of gasoline to the pump. We saw it with more intense acceleration,” he noted.

For the BC president, not every market has updated estimates for the exchange rate. Such a revision may affect the inflation expectation for this and year.

Campos Neto explained the devaluation of the dollar against the real by a few factors: positive fiscal surprise; a more proactive Central Bank; the new reality of world inflation and the improved operation of Brazilian companies in an environment with higher inflation; stabilization and investment opportunity in Brazil.