The President of the Central Bank, Roberto Campos Neto, said on Tuesday that preliminary data on the performance of the economy in the first quarter show that growth may positively surprise in the period.
In a speech during an event at BTG Pactual bank, Campos Neto highlighted that indicators show that the services sector should continue to drive economic activity in the country.
“Looking at the growth perspective for the first quarter, it seems like it’s going to be a positive surprise. That’s our first intuition at the Central Bank. We see services driving a lot of the growth,” said Campos Neto.
Last year, the Brazilian Gross Domestic Product (GDP) surprised, driven by the performance of agribusiness. The government’s economic team expects the final data for 2023 to show a growth of at least 3%, surpassing market estimates at the beginning of the year of a less than 1% acceleration. For this year, the official projection from the Ministry of Finance is an increase of 2.2%, while the market expects 1.60%.
The head of the Central Bank also highlighted the process of inflation decline in the country, stating that the recent numbers showed the overall index “a little better” and the core index “marginally worse”, but emphasized that the price trajectory is “within what we had planned”.
Data from December showed the National Consumer Price Index (IPCA) with an accumulated increase of 4.62%, which meant that Brazilian consumer inflation returned to stay below the target ceiling after two consecutive years of surpassing the objective.
Campos Neto also emphasized the importance of confirming the inflation target last year, when the National Monetary Council set the central target at 3% for 2026, the same targets set for the previous two years. According to him, the uncertainty about the horizon pursued by the Central Bank was leading to inflation expectations rising and making monetary policy planning difficult.
“In terms of inflation expectations, we see a milestone, which was the confirmation of the target. We always said that it was very difficult to have visibility of what to do in terms of monetary policy without being certain about what the target was,” he said.
The Focus survey released on Tuesday showed that the consulted analysts still predict an increase of 3.81% in IPCA in 2024 and 3.50% in 2025. The projection for both years remains above the official center target of 3.0%, but below the ceiling of 4.50%.
GLOBAL SCENE
The President of the Central Bank said he sees all the monetary authorities around the world pointing to a scenario of falling interest rates, despite different timings, highlighting the Federal Reserve’s posture as the “flagship” of the process.
“I have the perception that, with better data, the Fed has more comfort in being more cautious. It seems they have more comfort in waiting a little longer,” he said.
Last week, the Fed maintained its interest rate level, with Chair Jerome Powell stating that the institution still needed to see more favorable inflation data to be sure it’s time to reduce rates, dispelling bets that cuts could start as early as March.
Campos Neto also highlighted the trajectory of decline in overall inflation and core inflation in advanced countries, but pointed out that the levels are still above historical levels.
He mentioned a series of risks that have prevented the global inflation decline process, such as geopolitical issues and the post-pandemic scenario, marked by the effect of the large transfers of resources promoted by governments around the world.
