Brazil's Economic Policy Secretary Guilherme Mello stated on
Friday that discussion on changing the inflation target may
arise, although it was not put on the agenda by the Finance
Ministry.
Leftist President Luiz Inacio Lula da Silva has been highly critical of the independent central bank, including the current level of the country's benchmark interest rate, seen as too 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 policy perspective by the government could help anchor expectations and facilitate debate.
He said timing of the inflation target discussion will be 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 bank
was interested in addressing the issue at the National Monetary
Council (CMN), Brazil's highest-ranking economic policy body.
The CMN comprises the Finance Minister, Planning Minister, and central bank governor, meaning the federal government holds two of three votes. Meetings are held monthly, and although the definition of inflation targets is typically made in June, it can be anticipated.
Mello said it was likely the central bank will not meet this year's inflation target again after failing in 2021 and 2022, despite a monetary tightening that started earlier than the rest of the world and has left the benchmark interest rate at a current cycle-high of 13.75%.
"So it is evident that these facts raise the debate
about the adequacy of the target," he said.
Mello also said it was "evident" that public debt is
also affected by monetary policy and not only by fiscal
elements.
(Reporting by Marcela Ayres; editing by Jonathan Oatis and
David Gregorio)
