Copom may 'increase the dose of the medicine' if the inspector does not help, says Márcio Holland (Image: Shutterstock)
The decision of the Monetary Policy Committee (Copom) to raise the rate Selic by 0.25 percentage points (pp) at the meeting this Wednesday (18) was positive in the sense of maintaining the credibility of the Banco Centralsays the doctor in economics and professor at FGV, Márcio Holland.
According to Holland, in the program Market RoundupBrazil is going through a moment of accelerated deterioration of inflation current and expectations, which are approaching the ceiling of the target.
“We are playing with a very risky situation, which is to always stay within the tolerance bands (of inflation) and this could compromise the credibility of the Central Bank,” he says. The rise in interest rates, however, helps to break this possibility.
The FGV professor also assesses that the BC was prudent in “taking responsibility for itself” by linking the rise in interest rates to IPCA. The directors assessed that there is an upward asymmetry in their balance of risks for the prospective inflation scenarios.
Holland says the issue fiscal It was not highlighted as much in the September meeting statement, but it highlights that it is still extremely important for the direction of interest rates.
“O fiscal framework does not deliver sustainability of public debt, which is already rising and is projected to continue rising. We do not have a scenario of delivering a primary result sufficient to maintain the debt-to-GDP ratio constant,” he says.
The professor says that, today, the positive surprise in economic dynamism is holding back the output gap. However, any negative surprise in growth will cause debt to rise — “which generates more risk premium, more pressure on the exchange rate and more need for the Central Bank to increase the dose of the medicine.”
“With the government spending a lot and inflationary resilience coming, the Central Bank has to fulfill its role, which is done by increasing interest rates,” he says.