The transmission channels of monetary policy to the economy do not work in Brazil with the same fluidity observed in other countries, Central Bank President Gabriel Galipolo said on Tuesday.
In a solemnity for the 60th anniversary of the BC in the House of Representatives, Galipolo stated that this feature causes the municipality to have to apply “higher doses of the medicine” of interest to achieve the same effect.
“The Brazilian economy has been presenting or recently presented the fastest drop in its unemployment rate and the lowest unemployment rate in the historical series, one of the highest growth in families’ income and also the maxim of the historical series,” he said.
“This suggests that perhaps the transmission channels of monetary policy do not work with the same fluidity that usually work in other countries here in Brazil and that eventually you need to give higher doses of the medicine to achieve the same effect.”
By raising the Selic rate to 14.25% per year in March, the BC reaffirmed the relevance of the maintenance of unobstructed monetary policy channels and without mitigating elements for their action.
“For the fulfillment of its mandate and convergence of inflation to the lower costs, monetary policy must be able to act without impediments on all channels,” the BC said in the minutes of the last meeting of the Monetary Policy Committee (Copom).
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Analysts have questioned government actions that can stimulate the economy, making it difficult for the BC to cool the activity to tame inflation. Among the actions are a release of FGTS withdrawals and the launch of a payroll -credit program for private sector workers.
On Monday, Central Bank’s director of monetary policy, Nilton David, said that the existing encouraged credit in Brazil, which enables the cheaper loans to the part of companies, makes monetary policy no equitable effect on all agents, which forces BC to put interest on the highest level so that everyone is at the restrictive level.
