SAO PAULO, May 22, 2010 (FBC) – Private economists in Brazil cut their estimates of the country’s inflation rate this year, but the move failed to surprise central bank governor Roberto Campos as Nato is running well above official targets.
“Inflation is still very high,” Campos Neto told a seminar organized by Folha de S. Paulo newspaper on Monday, describing higher long-term projections as particularly problematic.
Brazilian policymakers have highlighted persistent inflation as one reason for higher interest rates, while Campos Neto has previously pushed for government rate cuts but rejected recent cuts.
In the central bank’s weekly survey on Monday, economists forecast inflation to reach 5.80% by the end of this year, down from last week’s average forecast of 6.03%.
The 2024 estimate, however, came in unchanged at 4.13 percent.
Finance Minister Fernando Haddad said the forecasts were now “in line” with his team’s forecasts, just days after the government thought there was room to start cutting rates.
But Campos was not impressed by Nato, linking the short-term cuts to a new fuel price policy announced by state-run oil giant Petrobras ( PETR4.SA ) that lowered the price of gasoline, diesel and cooking gas at the refinery’s gate.
“Long-term forecasts are little changed,” the central bank chief said. “And we have problems with long-term inflation estimates around 4%.”
Brazil targets 3.25% inflation for 2023, which will drop to 3% in 2024.
In its May briefing, the central bank expressed concerns about inflation, saying it “continues to assess that unchallenged expectations will increase the cost of returning inflation to target.”
The central bank has set its benchmark interest rate at 13.75% over six years from September 2022, drawing criticism from President Luiz Inacio Lula da Silva to tackle high inflation, which it sees as hampering economic growth.
At the same event in Campos Neto, Senate President Rodrigo Pacheco renewed calls to lower rates.
Campos Neto acknowledged that headline inflation in Brazil is slowing, but noted that the main index is “high” and “well above target”.
Reporting by Camila Moreira; Editing by Toby Chopra
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