Nilton David declares that there is no chance of inflation converging to the target if economic activity grows above potential
The director of Monetary Policy at the (Central Bank), Nilton David, said this Thursday (9.Oct.2025) that the Central Bank does not have “no pleasure” in maintaining the basic rate, the Selic, at a high level. He stated, however, that restrictive monetary policy is the “point of lowest risk and lowest cost” to meet the inflation target.
The director also said there is no chance of inflation converging to the target if economic activity continues to grow “above potential”, because this will put pressure on prices.
David participated in the event “Economic Scenarios in Perspective”, promoted by the Spanish Chamber, in São Paulo. Here is the presentation (PDF – 783 kB).
“The passage of time is always a nuisance for everyone. The passage of time with interest rates perceived as tight by everyone, including the Central Bank, is also a nuisance. The Central Bank has no pleasure in keeping interest rates tight”, David said.
The director stated that the Central Bank makes monetary decisions on “probabilistic and expected data” of a moment. He stated that there is a level of uncertainty regarding the future, and that the BC will await economic data to base the next Copom (Monetary Policy Committee) meetings on.
“We are looking at everything with a magnifying glass, trying to base ourselves on everything that is possible in terms of information, diagnosis and perception. […] The big learning is knowing that there is no way of knowing what the next steps will be and when the next steps will be.”said David.
He said that Brazil’s economic activity will have a “moderation” after 4 years of “robust” growth e “surprising”. For the director, the Brazilian economy was stronger than expected by authorities and economists.
“In the scenario going forward, we hope there will be some moderation. […] We currently have a growth level above potential, which ends up generating […] some inflation pressures, and that’s what we’re seeing today”said David.
The BC director said that the job market remains strong, with a falling unemployment rate and rising employment levels. He stated that the “distress index”which adds unemployment and inflation rates, indicates that the 2025 level is the lowest since at least 2002.
