O director of Economic Policy at BC (Central Bank), Paulo Picchettisaid this Thursday (25) that the effects of the conflict in Iran and El Niño on inflation are “insensitive” to decisions of monetary policy. He compared the shocks of war and climate change to a bruise that needs time to disappear.
In the statement from the last Copom (Monetary Policy Committee) meeting, the Central Bank signaled that a further de-anchoring of inflation expectations for longer horizons, particularly for the year 2028, was “evident”.
According to the collegiate, the inflation scenario deteriorated between the April and May meetings.
“Our view for the quarter of 2028 was to see that in that scenario there is this. In other words, if we doubled or tripled the Selic, we wouldn’t open the Strait of Hormuz or make El Niño change his mind and stop visiting us this year”, said Paulo.
The director reiterated that this is the last quarter of 2027. He highlighted that the Monetary Policy Committee did not “lengthen” the horizon by emphasizing the quarter of 2028.
“It’s like a bruise. You get hit and it turns purple. This purple has its dynamics, its inertia. There’s not much you can do to get rid of it, there’s no medicine you can take. One day it will go away, if another shock doesn’t appear”, said the director when comparing the shocks of supply to a “bruise”.
The monetary authority aims to converge inflation towards the center of the target, which is 3% with a tolerance range that varies from 1.5% to 4.5%.
