Raising Interests Shouldn’t Be Brazil’s Only Way to Fight Inflation, Says Minister

Brazil's Finance minister Guido Mantega The Brazilian government is considering additional anti-inflationary measures such as tax breaks and lower import tariffs but monetary policy remains the main tool to control prices, Finance Ministry officials said. Speaking in an event in São Paulo, Finance Minister Guido Mantega said Brazil may do more than just raise interest rates to bring inflation back to the government target.

He is among officials who have talked tough on price pressures in recent weeks. Brazil’s central bank is expected to make its first rate hike in nearly two years this month as rapid recovery in Latin America’s largest economy stokes inflation.

“One must raise rates when it is inevitable but other mechanisms should be used, such as (facilitating) imports,” Mantega said at an event in São Paulo, without giving details. “We have to avoid inflation going back to high levels.”

In New York, Secretary of Economic Policy Nelson Barbosa confirmed the government is studying tax cuts and lower import tariffs for specific sectors of the economy, but refused to name them.

The measures could be similar to last week’s decision to extend to the end of the year tax breaks on building materials that were due to expire in June.

Demand in that sector had risen, pushing prices higher, because consumers were anticipating purchases to take advantage of the tax breaks, government officials said.

Despite possible additional measures, Barbosa said monetary policy will remain the main tool for the government to rein in inflation, which is now expected by the central bank to rise to 5.2% in 2010.

The government has an inflation target of 4.5%, plus or minus 2 percentage points, for this year.

Despite refusing to anticipate which sectors could benefit from tax breaks, Mantega did say the electricity sector was one to be monitored because prices were very high due to taxes. “We have to keep our eyes on that,” he said.

The minister added the government remains committed to its 3.3% primary budget surplus target, even as tax cuts weighed on the country’s public accounts last year.

In New York, Barbosa revealed Brazil has already resumed the trend of declining debt-to-GDP ratios that had been interrupted by the fiscal stimulus provided during the global financial crisis.

Mercopress

Tags:

Ads

You May Also Like

Brazilian Bank Invests Overseas to Win U.S. Markets

Brazil’s National Economic and Social Development Bank (BNDES) made its first disbursement from a credit ...

US$ Millions in Brazilian Shoes Barred by Argentina

Argentina put new rules in place for the importation of footwear on September 1st, ...

WTO Favors Brazil Against EU on Sugar

Brazil’s Ministry of Foreign Relations has commented on the World Trade Organization’s (WTO) final decision confirming ...

Brazil Expecting US$ 108 in Exports for 2005

Brazil’s Minister of Development, Industry and Foreign Trade, Luiz Fernando Furlan, says that the ...

Brazil Has Already Saved US$ 23 Billion this Year to Pay Debt Interest

The primary surplus – which represents money saved by the federal government to repay ...

Mothers of the Plaza Sé in Brazil Want More Action to Find Disappeared Kids

The Brazilian Association for the Defense of Missing Children (ABCD), known as the Mothers ...

Financing for Brazilian Farmers Up 7% to US$ 61 Billion in the Next Crop

Brazilian farmers should have 116 billion reais (US$ 61 billion) for the financing of ...

Carmem

He opens the door and makes a face in disgust, as if someone else ...

Brazil Invited to Middle East Peace Conference in Washington

The President of Palestine, Mahmoud Abbas, in New York for the opening of the ...

Drought and Lack of Technology Lower Expectation of Brazil’s Harvest

Brazil expects to produce 122.6 million tons of grain in the 2005/2006 agricultural year, ...