Tombini: there is no risk of runaway inflation.

Kelly Oliveira
Reporter from Agência Brasil

Brasilia – The president of the Central Bank (BC), Alexandre Tombini, said this Monday, the 19th, that there is no risk of inflation spiraling out of control in Brazil. Tombini added that the BC's strategy remains valid, but, if necessary, the basic interest rate, the Selic, can be adjusted.

"I would like to make it very clear that there is no risk of runaway inflation in the country today, despite the fact that Brazil has managed to reach a new level for interest rates in general, and, in particular, for the monetary policy rate [the Selic rate]."

In January of this year, the Monetary Policy Committee (Copom) of the Central Bank opted to maintain the Selic rate at 7,25% per year. In a statement, the Central Bank reinforced that it was necessary to keep monetary conditions (Selic at the current level) stable "for a sufficiently long period".

However, with the release of January's inflation figures, some analysts believe the Central Bank will raise the Selic rate to control rising prices. Last month, the Broad National Consumer Price Index (IPCA) rose 0,86%, the largest monthly variation since April 2005, when the increase reached 0,87%. December also registered significant inflation, at 0,79%. With January's result, the accumulated IPCA over 12 months reached 6,15%, compared to inflation of 5,84% registered throughout last year.

Tombini highlighted that monetary cycles have been abolished. "The Selic rate will fluctuate at lower levels than in the past," said Tombini, launching the Otimiza BC project today. The objective is to create a channel for dialogue to discuss the reduction of compliance costs, expenses incurred by financial institutions in sending information to the regulatory body. The Central Bank is also announcing today the first measures to reduce these costs.

Edited by: Juliana Andrade