BRASILIA, Feb 10 (Reuters) –
Brazil’s Economic Policy Secretary Guilherme Mello stated onFriday that discussion on changing the inflation target mayarise, although it was not put on the agenda by the FinanceMinistry.
Leftist President Luiz Inacio Lula da Silva has beenhighly critical of the independent central bank, including thecurrent level of the country’s benchmark interest rate, seen astoo high, and the official inflation targets, seen as too low.
During an event hosted by Bradesco Asset Management,Mello noted that the presentation of a clear fiscal policyperspective by the government could help anchor expectations andfacilitate debate.
He said timing of the inflation target discussion willbe determined by the ministers, central bank governor, and Lula.
“I think this is an issue that may appear at some point,and we will be prepared when it appears to subsidize the(finance) minister with the necessary information,” he added.
Mello said he had followed reports that the central bankwas interested in addressing the issue at the National MonetaryCouncil (CMN), Brazil’s highest-ranking economic policy body.
The CMN comprises the Finance Minister, PlanningMinister, and central bank governor, meaning the federalgovernment holds two of three votes. Meetings are held monthly,and although the definition of inflation targets is typicallymade in June, it can be anticipated.
Mello said it was likely the central bank will not meetthis year’s inflation target again after failing in 2021 and2022, despite a monetary tightening that started earlier thanthe rest of the world and has left the benchmark interest rateat a current cycle-high of 13.75%.
“So it is evident that these facts raise the debateabout the adequacy of the target,” he said.
Mello also said it was “evident” that public debt isalso affected by monetary policy and not only by fiscalelements.(Reporting by Marcela Ayres; editing by Jonathan Oatis andDavid Gregorio)
