Brazil’s Reason to Fight Inflation: To Narrow Inequalities

Inflation represents a "powerful" mechanism of income concentration and must be controlled to prevent a widening of inequalities. This assessment was made today, June 13, by the president of the Central Bank, Henrique Meirelles, before the Senate Economic Affairs Commission, which invited him to explain the country’s policy on interest rates.

"Inflation is a powerful mechanism of income concentration. And to have more social inclusion and a better income distribution, it is necessary to keep it under control and at a low level," he commented.

The annualized official benchmark interest rate in Brazil currently stands at 15.25%, which is one of the highest in the world, despite a 4.5 percentage point reduction in recent months.

It is up to the Central Bank to find instruments to meet the inflation targets set by the National Monetary Council, which is composed of the ministers of Finance and Planning and the president of the Central Bank. According to Meirelles, the Bank must use "all possible means" to meet the target.

Meirelles affirmed that the Monetary Policy Committee analyzes "all market trends, domestic and foreign," to make a decision that does not allow inflation to rise.

This, he said, is more important in Brazil than in the majority of other countries in consequence of "our inflationary culture." "Which partly explains the fact that we have one of the highest interest rates in the world," he concluded.

Agência Brasil

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