08/24/2024 – 16:34
Central Bank President Roberto Campos Neto said this Saturday, 24, that recent volatility may be showing that the market is pricing in less room for fiscal and monetary interventions in the future.
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This week, central bankers from around the world traveled to Jackson Hole to attend the world’s premier economic gathering, the Kansas City Fed’s annual symposium in Grand Teton National Park.
The panel Campos Neto spoke on was about monetary transmission, or how interest rate movements actually affect economic activity or are having less of an effect than traditionally expected.
Campos Neto, whose term ends in December, said the slowdown in China’s economy could impact Brazil through a terms-of-trade shock or lower import prices for Chinese products, although the net effect would depend on the size of the slowdown.
Fees
His remarks follow recent communication efforts by Copom members to emphasize that the central bank remains united in considering all options for its next monetary policy decision, scheduled for its September 17-18 meeting.
Campos Neto and other BC directors highlighted that there is no defined guidance for the future, a stance they described as data-dependent.
In July, Copom kept the interest rate unchanged at 10.5% for the second consecutive time, but the rhetoric was toughened, citing the need for even greater caution and diligent monitoring of inflation-conditioning factors.
Annual inflation reached 4.5% in July, further away from the official target of 3%.
Bets embedded in the yield curve futures are predicting a more than 80% chance of interest rates rising next month, which, if confirmed, would occur as the Fed prepares to ease monetary policy.
Communication
Central Bank President Roberto Campos Neto also said that discussing the transmission of monetary policy will become increasingly difficult without addressing fiscal issues and cited the growing weight of public debt in the face of expanding government spending.
Campos Neto highlighted that the income transfer programs implemented during the pandemic are now larger and have become permanent.
In Brazil, 50 million people are “earning money from the government, compared to 43 million people who are employees and entrepreneurs,” he added.
Without directly mentioning the government of President Luiz Inácio Lula da Silva, he said: “We need to think about a precise strategy and understand the efficiency of these government programs, especially in emerging market countries, and what this has done to the debt.”
“I think we need to start communicating better about misallocation of resources.”
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