Putting more money into the economy will generate volatility and higher inflation, warned the president of the Central Bank, Roberto Campos Neto, at an event promoted by the Brazilian Federation of Banks (Febraban).
“Putting more money into the economy, unlike in the past, when supply adapted more quickly, will generate greater inflation volatility, and ensuring fiscal credibility is essential. The most important thing now are policies to strengthen the supply side,” he said this Friday (25).
“The disinflation process will not be linear, contrary to what the markets price. We think the clear message today from economic agents is that fiscal frameworks need to have limits and we need to recognize that the supply side is less adaptable”.
“Instead of looking at the level of inflation, it is important to look at the volatility of inflation”
Campos Neto also said that, instead of looking at the level of inflation, the important thing is to look at the volatility of inflation.
“If we are saying that supply will be less adaptable going forward, we are saying that the various shocks that will come, inflation will be more volatile. More volatile inflation, with greater uncertainty, raises this floor and makes this relationship between aggregates and inflation more inclined”.
According to him, in the face of a large monetary expansion, it increases the difficulty in predicting inflation.
Source: CNN Brasil
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