Delfim questions the credibility of the Central Bank.

247 – Economist Antônio Delfim Netto, an informal advisor to the government since Lula's presidency and former minister, continues to predict an increase in the Selic rate if there is no what he calls "fiscal pressure." Read the article published in Folha:

Credibility

The Central Bank has been a source of academic innovation and practical application of its findings in conducting economic policy.

Disheartened by the manipulation of public accounts—which destroyed his credibility, rendered the concept of net public debt/GDP irrelevant, and prevented even the assessment of the (positive or negative) direction of public sector demand—he decided to construct a reliable indicator of "fiscal impulse": the structural fiscal surplus (SFE), which takes into account economic fluctuations and demands absolute morality in the records.

There is no consensus on how to calculate it. A good pragmatic definition is that formulated by the competent economist from Itaú bank, Mauricio Oreng: "The SPE is the result of public accounts (before interest payments) adjusted for the cycles of economic activity (measured by GDP or other sectoral variables), asset prices (raw materials, in the Brazilian case) and non-recurring budgetary operations (i.e., revenues and expenses of a temporary nature)."

It is close to the BC's definition. Oreng constructed the SPE from 2001 to 2011 in an unmissable work --"Brazil's Structural Fiscal Balance" (April 2012)-- and updated it for 2012 ("Macrovisão", May 2013). By definition, the difference in the SPE between two periods is a measure of fiscal impulse. It was neutral in 2009, strongly positive in 2010 (1,5% of GDP), negative in 2011 (0,9% of GDP) and positive in 2012 (0,9% of GDP).

The Central Bank has already used its SPE (Strategic Planning and Budgeting) to establish the increase in the Selic rate to 8,5%, based on the information that "fiscal pressure" in 2013 remains positive. The graph below gives an idea of ​​the response, in the models used by the Central Bank, to the reduction in the accumulated 12-month inflation rate generated by a 1% increase in its structural primary surplus:

The effect is delayed and reaches its highest value between the 7th and 8th quarters (between 20 and 24 months): something like 0,10% and 0,25%.

Apparently, the implicit signal in the Central Bank's action to regain credibility is that, if there is no reduction in "fiscal pressure," it will continue to raise the Selic rate until it feels that "inflation expectations" have decreased to 4,5%.