World concern should move from inflation to low growth, says Campos Neto

The president of the Central Bank, Roberto Campos Neto, considered, at a BlackRock event, that the main concern in the world should move from inflation to low growth from now on, with the perception that the worst has already passed in the inflationary issue in several countries .

“Perhaps we are now entering a period of change from the main concern of inflation to low growth. Inflation not rising, but persistent and lower growth or with negative rates.”

According to Campos Neto, BC understands that 2023 is a year of growth slowdown, also in Brazil. He cited confidence indicators and surveys that still point out that the biggest risk to global growth is down.

The BC president once again said that the risk for the financial market came out of the traditional system. “Derivatives volume is going up a lot in players that are not in the regulated world,” he said, also citing weak liquidity in the sovereign bond tranche.

Campos Neto also mentioned again the concern with the supply of semiconductors in the midst of geopolitical issues between China and the US.


The president of the BC also said that it is important that the directors of the monetary authority, including himself, fulfill their mandates until the end and that this strengthens the recently conquered autonomy of the body, which “tested” for the first time with the change of government .

“It is very important that the directors understand that they have a mandate, they have to fulfill the mandate to exercise this autonomy and, in this case, this extends to me as well. It is important that I stay these two years and that I show that all the effort that was made to this institutional gain movement serves for moments of government transition, ”he said.

new government

The president of the BC once again highlighted that it is necessary to see what will be defined in terms of the new government’s fiscal framework to assess the impact on the debt trajectory, but reinforced that the final design is “connected to the BC’s reaction function” in terms of interest rate decisions. In recent weeks, the future interest rate curve has priced in new increases in the Selic rate due to fears of fiscal irresponsibility on the part of the elected government.

“We need to see what will come out of the redesign of the fiscal anchor. Redesigning subsidy elimination spending is difficult, but it needs to be done. Long rate is super sensitive to debt trajectory. Brazil needs to show balance in the accounts looking forward.”

According to Campos Neto, fiscal uncertainty today has become more important than that directly related to inflation, which has been making an inflection, and to economic growth.

In his assessment, it is more difficult to coordinate fiscal and monetary policy in times of contraction, because the speed of monetary policy is faster and more focused and, in the fiscal sphere, there is a desire to continue welfare policies due to the social consequences of the covid-19 pandemic .

Fit in USA

Campos Neto said that the speed of monetary adjustment in the United States should be reduced, but still with a “very tough message” in relation to inflation.

In a lecture at an event organized by BlackRock Brasil, Campos Neto said that the final projected rate in that country should not go “much beyond” the expected 5.17%. He pointed out that the disinflation process is not linear and that the highest level persists before returning to the target.

“The more coordinated the monetary with the fiscal, the easier this work”, he concluded.

Brazilians’ real salary drops 18.8% in the pandemic, points out ILO report

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