Blurring the mandate

摘要

Is the Central Bank targeting growth? OR much of the last century inflation FOR much of the Iast century inflation was as prominent a feature of Brazilian life as football. It was finally tamed, first by the Real Plan of 1994 involving a new currency and fiscal measures, and then from 1999 by requiring the Central Bank, which was granted operational independence, to set interest rates to meet an inflation target. Since 2005 that target has been 4.5%, plus or minus two percentage points. So the Central Bank surprised everyone in August when it cut its benchmark rate by half a point (to 12%) even though inflation was then at 6.9%. On October 19th, the bank did the same again. So is the government of President Dilma Rousseff, in office since January, giving priority to other goals, such as sustaining growth and preventing the overvaluation of the currency, rather than keeping inflation low? And has the Central Bank lost its independence?No, say officials, who cite two sets of reasons for the rate cuts. First, having overheated last year, the economy stalled in the third quarter, partly as a result of earlier interest-rate rises and modest fiscal tightening. The consensus forecast is for gdp to expand by only 3.3% this year. Second, the bank argues that inflation was boosted by one-off factors, such as big rises in municipal bus fares and a shortage of ethanol (widely used as vehicle fuel in Brazil). In the minutes of its August meeting, the bank's monetary-policy committee stated that the deteriorating outlook for the world economy and falling commodity prices would put downward pressure on prices in Brazil, allowing inflation to reach the 4.5% target in the course of next year.