It’s Time Brazil Adopts a More Flexible Monetary Policy, says BNDES Chief

“Now that inflation is under control in Brazil, we can adopt a more flexible monetary policy. That is what is going to happen,” said Guido Mantega, president of the National Economic and Social Development Bank (BNDES) and former Minister of Planning in Lula’s Administration.

In his view, the big challenge that Brazil faces now is to achieve sustainable growth with the government deficit under control, fiscal balance, inflation under control, and a surplus in current accounts.


Mantega denied that the economic model adopted by Lula’s Administration, based on fiscal balance and control of inflation, is conservative.


He observed that the Administration’s objectives are the revitalization of industrial and agricultural policy, a new international trade posture, and a competitive role in the international arena.


“Monetary policy must become more flexible, and interest rates must fall. The exchange rate will respond, moving upward, and we shall thus have an equation favorable to economic development.”


Although he didn’t want to specify dates, Mantega guaranteed that this process is already underway.


He recalled that in his most recent public presentations, he indicated that interest rates had reached their limit and would not rise any further.


Mantega judged that monetary policy will allow the Brazilian economy to accelerate in the second half of this year, maintaining this momentum in 2006.


ABr – www.radiobras.gov.br

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