By Bernardo Caram
June 8 (Reuters) – The president of the Central Bank of Brazil, Roberto Campos Neto, said on Saturday that making monetary policy decisions taking into account current inflation is like driving a car looking in the rearview mirror, underlining the importance of observing the price expectations for the future.
The statement comes amid a persistent worsening of inflation expectations for the coming years by analysts, even in the face of a benign trajectory of current inflation.
“If the Central Bank made monetary policy decisions using current inflation, it would be like driving a car looking in the rearview mirror, you are going to crash,” he said.
The board of directors of the Central Bank has shown its concern about the unanchoring of expectations, with a deterioration in projections in recent weeks for inflation in 2024, 2025 and 2026.
The estimates for the 2025 IPCA – which includes the Central Bank’s operational horizon, taking into account the lag in the effects of monetary policy – stand at 3.77%, according to the latest Focus bulletin of the Central Bank, compared to the 3.64% from a month ago.
The inflation target is 3% for this year and the next, with a tolerance margin of +/-1.5 percentage points.
The base interest rate currently stands at 10.50% annually, after the Central Bank decided to slow down the pace of monetary relaxation with a cut of 0.25 percentage points in the Selic in May, citing uncertainties in the economic environment .
“It’s obvious that we would like to have the rate as low as possible, but our structural interest rate is high,” Campos Neto said.
(Edited in Spanish by Javier Leira)
