Finance Minister said there is short-term inflationary pressure, but that monetary policy affects the next 18 months
The Minister of Finance, Fernando Haddadsaid this Tuesday (June 25, 2024) that the impacts of the floods in Rio Grande do Sul are short-term and “it does not make sense” the BC (Central Bank) takes into account when defining monetary policy, which has a medium and long-term effect.
He gave an interview to journalists after the publication of the minutes of the Copom (Monetary Policy Committee) meeting that decided to maintain the basic rate, the Selic, at 10.5% per year. The document left the door open for possible “future adjustments” in base interest.
The minister said that possible “adjustments will always happen” and that the scenario now is “cycle maintenance”. Haddad declared that the minutes are “very adherent” to the statement, released on Wednesday (June 19, 2024), which is, according to him, “good”.
He also said that there is inflationary pressure related to the impacts of the floods in Rio Grande do Sul. He stated that these effects are short-term and are being managed by the federal government.
“This is inflation that affects the short term. The Central Bank’s horizon is medium and long term. It doesn’t make much sense to take into account what is happening in Rio Grande do Sul for monetary policy purposes, because today’s interest rates are affecting 12 or 18 months ahead”he said.
The Central Bank twice cited the climate disaster in Rio Grande do Sul in the minutes. BC directors stated that there is great uncertainty regarding the economic effects of the tragedy. “Uncertainties remain about the intensity of the drop in activity and its subsequent recovery, as well as about the decrease in capital stock, caused by floods and floods”, says the minutes.
The BC also stated that some members of the collegiate show “greater concern about food inflation in the short term, highlighting not only the effect of the floods in Rio Grande do Sul, but also revisions in food prices in other regions”.
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