by Marcela Ayres
BRASILIA (Reuters) – The behavior of the economy in the second quarter came within the expectations of the Central Bank, said Wednesday the president of the municipality, Roberto Campos Netos, pointing out that the market has been more volatile in its forecasts and that it should revise for lower your projections for the year.
When participating in a public hearing in the Chamber of Deputies, he once again said that the BC will act to curb inflation with adjustments in the Selic rate. And he reiterated that the Brazilian fiscal picture is significantly better than that calculated months ago.
Weak performances in industry and agriculture overshadowed the strength of services and the Brazilian economy registered a decline of 0.1% between April and June over the previous three months, compared to expectations in a Reuters survey that it would increase by 0.2%.
“Basically the number that came today is in line with what we had”, said Campos Neto.
He estimated that market agents should slightly worsen their vision for the Brazilian economy this year after the IBGE’s release. For Campos Neto, while the market has been adjusting its expectations much higher and lower, BC’s view has been more constant.
“With today’s number, we think it can be revised down a little bit, let’s see,” he said, regarding the latest Focus bulletin estimate, of a 5.22% increase for the economy this year.
The BC forecast in June a 4.6% increase for the GDP in 2021 and should update its projections later this month, in the Quarterly Inflation Report.
To Reuters, the Economic Policy secretary at the Ministry of Economy, Adolfo Sachsida, stated that the outlook for GDP this year continues to be for growth above 5%. Officially, the ministry forecasts a 5.3% increase.
Quite asked about the high prices in the economy in his participation in the hearing, Campos Neto said that inflation is “running quite high”, being “very undesirable”.
In the 12 months through July, the IPCA hit 8.99%, from 8.35% in June, going well beyond the official target ceiling for this year — inflation of 3.75%, with a margin of 1.5 percentage points for more or less.
The BC president reiterated that the monetary authority has recognized a rise in core inflation, but he repeated that the BC sees an accommodation in the exchange rate and in commodity prices.
According to Campos Neto, the various adjustments to the tariff flag, in the midst of the water crisis, had a strong impact on inflation, as they spread throughout the production chains. He also said that some of these flag changes came “far out of line”.
“The Central Bank reacts to this (inflation) by raising interest rates, a language that it will pursue the target and alerting to all the risks that exist,” he said.
Since raising the Selic by 1 point in early August, at 5.25% per year, the BC has repeated that it should repeat the dose at the meeting of the Monetary Policy Committee (Copom) this month, now aiming to take the basic rate of interest rates beyond the neutral level to be able to anchor inflation expectations.
Echoing his recent public speeches, Campos Neto also sought to highlight that the fiscal picture is much better than expected months ago, and that Brazil managed to go ahead with structuring measures even in the midst of the Covid-19 pandemic.
“Things are not always the way we want them, but in general I think there has been progress,” he said.
“We need to continue sending a message of credibility so that, going forward, there is a perception that the government is on the path to fiscal discipline. I have seen statements by the president (Jair Bolsonaro) always in this sense, that everything will be done within the ceiling (of expenses), I have seen other statements by the government, Minister Paulo Guedes, always in this sense”, he added.
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