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New Central Bank President Defends Autonomy and Low Inflation



In his first official address, the president of the Central Bank (BC), Roberto Campos Neto, defended the institution’s formal autonomy. He said he will seek to keep inflation at low and controlled levels and promised to continue to improve transparency in the Bank’s communication with society.

“In addition, we believe that an autonomous Central Bank would be better prepared to consolidate the recent gains and make room for the new advances that the country needs so much,” said Campos Neto.

Indicated by the Minister of Economy, Paulo Guedes, in November, Campos Neto only took office at the end of February because it had to be the submitted to Federal Senate and to have the name approved. At the broadcasting ceremony, he said he was proud to work with Guedes. “The meetings at Leblon [during the election campaign] will not be forgotten. We are really in a well-tuned orchestra under the conductor Paulo Guedes,” he said.

Campos Neto pointed out that he will work to ensure that the Central Bank fulfills the two main missions: maintaining the purchasing power of the currency through low inflation and the soundness of the financial system. Next week, the BC president will chair his first meeting of the Monetary Policy Committee (Copom), which sets the Selic rate – basic interest rates on the economy – currently at 6.5% a year.

In his first address to the post, Campos Neto also said that the government will work to expand the private capital market (raising funds for large projects by the private sector), democratization of the financial system and to improve the population’s financial education, to stimulate participation of all in the market and expand the training of savings.

The autonomy of the Central Bank is currently under discussion in the National Congress. Under the proposal, the President of the Republic could not interfere in monetary policy, with the CB being free to decide on interest and take action.

Neto of the economist Roberto Campos, Minister of Planning in the 1960s, Campos Neto defended the reduction of the role of government in the financial system and the development of the private sector. “We want to make the market more open to foreigners, with a possible convertible currency that will serve as a reference for the region,” he said.

He also defended the reduction of subsidized credit for companies, mainly for the National Bank for Economic and Social Development (BNDES). For Campos Neto, the distortions caused by low-interest loans became more explicit after the reduction of the Selic rate to 6.5% per year.

Balance Former BC President Ilan Goldfajn took stock of his management. He recalled that he was able to reduce official inflation by the Broad National Consumer Price Index (IPCA) from 11% at the end of 2015 to about 4%, while reducing the Selic rate to 6, 5% a year, at the lowest level in history. According to him, the greater transparency of the BC with the society and the credibility gain contributed to reducing the expectations of inflation.

Goldfajn, however, advocated the approval of reforms and the formal autonomy of the Central Bank as measures that will contribute to keeping inflation low at sustained levels. “The fall in inflation allowed us to reschedule expectations and release demand forces after two years of a perverse combination of inflation and recession [2015 and 2016].” The decline in the Selic rate occurred in a sustainable manner. Market interest indicates confidence that we can have more interest structural losses in the future, depending on the approval reforms and the administration of the economy, “he said.

According to Goldfajn, the monetary policy in his mandate was stimulating (he tried to maintain low interest to stimulate the economy). He said that proof of the success of his management was that in 2018, Brazil did not have to increase the Selic rate in a scenario of dollar hikes, falling commodity prices, and resource flight to economies advanced. “In a year in which the majority of the emerging ones raised the basic rates, we avoid withdrawing monetary stimulus so necessary for the recovery of the Brazilian economy,” he said.

In addition to the management of monetary policy, Goldfajn highlighted the BC + Agenda, a set of measures to reduce the cost of credit, modernize legislation, expand financial inclusion and make the financial system more efficient. According to the former president, 41 BC + Agenda actions have been completed and 27 are in progress.