President of the Central Bank indicates a new increase in the Selic rate in September

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The Central Bank is not thinking about dropping interest rates at the moment, it is thinking about converging inflation, said this Monday the president of the monetary authority, Roberto fields Grandchildemphasizing that the situation inspires care and that the battle against rising prices in the country is not won.

fields Grandchild highlighted that a large part of the positive effect recently observed on inflation data is the result of government measures, reinforcing that the Central Bank’s current strategy remains the same as that presented in August by the Monetary Policy Committee (Copom), that it will remain vigilant and analyze a possible final adjustment in the Selic rate this month.

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According to him, the BC “continues to navigate in an environment of high uncertainty”, citing still open issues involving government policies, such as the source of funding for the boosted Brazil Aid in 2023 and the continuity of exemptions on fuel.

“We have communicated that we do not look at, do not think about falling interest rates at this time. We think about finishing the job. Finishing the work means converging inflation,” he said at an event promoted by the newspaper Valor Econômico.

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The BC president stated that inflation accumulated in 12 months reached its peak in Brazil and began to improve, impacted by tax cuts, adding that the price decline also generates a benign effect on inertia for 2023. it is possible to celebrate and mentioned concern with inflation related to the service sector.

“There are still elements of great concern and the message is that we need to fight this process, understanding that we are going to go through three months of deflation, most likely, but that the battle is not won,” he said.

In August, the BC increased the basic interest rate by 0.50 percentage point, to 13.75% per year, and indicated that it was close to the end of the aggressive cycle of monetary tightening to control inflation in the country.

fields Grandchild He also said that the Copom will need to look into data on the labor market in the country, which has recorded positive surprises, with a possible reduction in the space for expansion without generating inflationary pressures. He stated that there are structural changes in relation to the workforce in the world and that there is concern about whether this movement is taking place in Brazil.

In the presentation, the BC president once again said that the market understands that the work of the monetary authority in managing the interest rate to control inflation “basically is already done”, already expecting a drop in interest rates ahead.

high GDP

In its first public statement after the release of the second quarter GDP result, fields Grandchild said that the 1.2% increase in activity compared to the previous three months was a surprise, with strong data on investments and household consumption “that we did not imagine”.

The BC president stated that only with the loading effect of the first semester, the Brazilian GDP will increase by 2.6% this year even if the activity does not grow in the last two quarters. “We still believe that we will see upward revisions to growth,” he said.

Last week, before the result for the second quarter, he had already stated that the monetary authority will revise its forecast for GDP growth in 2022 to “a little above 2%”. The body’s current estimate, released in June, points to an increase of 1.7%.

fields Grandchild highlighted that Brazil is an exception in a world with countries revising their growth projections downwards.

The BC president once again expressed concern about a possible scenario in which the world enters an economic slowdown and global inflation is slow to subside. According to him, this scenario would provoke a re-pricing of global assets.

When mentioning the opportunity for Brazil in the face of the reconfiguration of global value chains, fields Grandchild said that “it is important for us to have political and institutional stabilization” so that capital flows reach the country.

Source: CNN Brasil

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