(Bloomberg) -- Brazil’s central bank should stick to keeping prices in check rather than muddying that task by also targeting jobs and growth, the bank’s president, Ilan Goldfajn, told Bloomberg News.
After the central bank’s success in getting inflation under control, the government now wants to enshrine its autonomy in law. While welcoming the prospect, Goldfajn was wary of proposals to add employment to the institution’s duties.
"We have a system of inflation goals," he said in an interview at the bank’s headquarters in Brasilia on Thursday. "This has served Brazil well."
The 51 year-old former chief economist for Itau Unibanco has been widely credited with taming Brazilian inflation, bringing it down below target less than two years after it reached double digits. In the process, he’s overseen Brazil’s most aggressive monetary easing cycle in a decade, cutting the benchmark Selic rate to a record low of 6.75 percent.
With the question of formalizing the bank’s autonomy now in the air, Goldfajn says he’d favor a bill that set fixed terms of office for its directors.
"I don’t think there’s any way of having a law regulating central bank autonomy without thinking about fixed mandates," Goldfajn said, while sidestepping questions of whether he could remain in office after a new government takes over in January.
"All questions about institutions depend on not letting it become personal," he said, adding that new rules would apply to the next, rather than the current, board.
Finance Minister Henrique Meirelles reiterated his support for an autonomous central bank on Thursday. So did House Speaker Rodrigo Maia, but he added that its passage in Congress wouldn’t be easy.
Easing Cycle
Whether the central bank will be able to cut for a 12th straight meeting in March depends on how a number of risk factors play out. Annual inflation slowed unexpectedly in January, reviving wagers on additional easing, but Congress’s decision to bury the government’s pension proposal has lowered expectations of further market-friendly moves.
"In as much as you frustrate adjustment and reforms, you become more vulnerable to other shocks that may come along," he said.
Goldfajn said that Brazil had developed several buffers that could help the economy cope with increased volatility in the run-up to presidential elections in October, citing healthy levels of international reserves, a comfortable level of FX swaps and a strong trade balance. Still, he warned against complacency.
"There’s global growth with low interest rates in various parts of the world," he said. "It’s a combination that doesn’t usually last long."
(Includes Goldfajn’s comments on risk scenarios from ninth paragraph onwards.)
