One of the most important figures of the International Banking Conference was the head of the Central Bank of Brazil, Roberto Campos Neto, former director of Santander Brazil, who took over the leadership of the Central Bank of Brazil at the hands of Jair Bolsonaro and Everything indicates that he will remain there at the request of President-elect Luiz Lula Da Silva.
Campos Neto is celebrated as the central banker who reacted earlier than anyone else by raising interest rates to curb inflation. It started in March 2021, bringing the Selic rate from 2% to 2.75%. Today Selic is at 13.75%. In exchange for this monetary tightening, Brazil is now the only country in the world that can show three consecutive months of falling inflation rate.
The annual rate of change of CPI in Brazil in September 2022 was 7.2%, 1.6 points less than the previous month. The monthly change in the CPI (Consumer Price Index) was -0.3%, so the accumulated inflation in 2022 is 4.3%.
The banker Ana Botín showered him with praise.
Campos Neto explained his monetary tightening strategy as the right medicine for what he perceived as inflation that would not be transitory. A different reading from what the US Federal Reserve and the European Central Bank had until last year.
It came to this conclusion after evaluating the impact of liquidity shocks governments applied to address the devastating effects of the pandemic on the economy, demand shocks once economies reopened, and the supply shock of goods and energy that resulted from that rapid reopening. Namely: the supply of goods and services has grown more slowly than the demand.
The Brazilian banker warned that central bankers today must find the right tone for monetary policy: “We run the risk of being too hard or too weak from the start. In the first case, the cooling of the economy can be excessive, in the second the risk is that of losing credibility. You have to navigate between these two errors.
He welcomed rate hikes in the US and Europe because “this means we will stop importing inflation”. In conclusion, you warned that in order to ensure growth, great care must be taken not to increase the tax burden on capital, which is precisely what will finance the expansion of production that normalizes the supply of goods and services.
For his part, the chief global economist of the Santander Group, the Argentine Juan Cerutti, pointed out that the world has suffered two shocks in a short time, one of supply and the other of demand, which have put economies in a place that hadn’t been seen in a long time several decades: stagflation. And he pointed out that to get out of this trap, 8 out of 10 central banks have already chosen the path of monetary tightening.
But he pointed out that Latin America as a region is going through the Federal Reserve’s policy of raising rates quite well because its economic fundamentals are relatively better than in previous crises, basically because they have a good fiscal position and most countries are managed to get the most of its debt is denominated in local currency. And because the prices of raw materials remain at very attractive levels. His impression of him is that the recovery of the economies could begin to be seen in the middle of 2023. he He was talking about the region, not Argentina.
Source: Clarin
