President of the Central Bank (BC) in the first two governments of Luiz Inacio Lula da Silva, between 2003 and 2010, Henrique Meirelles recommended that Gabriel Galipolo, current occupant of the post, maintain a “technical distance” of the President of the Republic.
By participating in a Latin America Investment Conference (LAIC) panel, UBS BB event, Meirelles said he noticed a market concern with the proximity between Galipolo and Lula, which contributes to raising doubts about the municipality’s commitment to do what it is I need to bring inflation toward the goal of 3%.
For Meirelles, Galipolo should avoid participation in many meetings with government ministers, as this helps to strengthen among market agents the perception of proximity to the executive, influencing expectations. “I think a technical distance is important … it is necessary to maintain a respectful and technical distance from the Presidency of the Republic,” he said.
He argued that Selic continues to go up until the BC ensures credibility. “If it’s not enough, it goes up more, even if you then have to cut it.” For the former BC president, the monetary authority has total technical conditions to make inflation fall to the 3%target.
However, he pondered, the market needs to believe that BC’s actions are effective and that inflation will actually converge.
To this end, said Meirelles, the BC has to “impose” on concrete and technical measures, clearly demonstrating that the persecution of the goal is not rhetoric. “The moment it does this, the BC gets the war of expectations,” he concluded.
