hinted at a potential target change, calling high lending costs in the country "inexplicable" as he continued his push for lower interest rates.
Campos Neto said at an event hosted by the European Economics & Financial Centre that raising inflation targets would increase risk premia and create harm in the longer term.
"If you are not meeting the target and you want to increase the target, that gives a sense to the market that you are trying to gain flexibility to cut rates when you shouldn't," Campos Neto said.
Brazil has an inflation target of 3.25% for 2023, which will be lowered to 3% in 2024, but consumer prices reached 4.65% in the 12 months through March. Benchmark interest rates stand at a six-year high of 13.75%.
Inflation targets in Brazil are set by the National Monetary Council, comprising Campos Neto and the ministers of finance and planning, which means the government would have a majority to change them even if the independent central bank objects.
Earlier this year, speculation emerged of a potential
government move to boost the targets in a bid to lower lending
costs, but that did not materialize so far.
"If it happens, we will wait to see how that impacts," the central bank chief said. "But our recommendation is that this shouldn't be done."
Campos Neto also noted that headline inflation levels in the country were going down but at a slow pace, noting the core index remains "very resilient" while inflation expectations rose from December. He again praised the government proposal for a new fiscal framework, noting it was a sign the country was heading in the "right direction," but stressed there was no mechanical relation between fiscal goals and the central bank's job. (Reporting by Isabel Versiani and Gabriel Araujo; Editing by Steven Grattan)
