Rio, July 11, 2003 (Agência Brasil - ABr) - "The risk of uncontrolled inflation no longer exists. This represents a conquest by the current Administration. and it will be consolidated over the coming months." This declaration was made today by the president of the Central Bank (BC), Henrique Meirelles, at the bank's headquarters, at the opening of the seminar, "Monetary Policy: Shocks and Effectiveness."

Meirelles explained how the BC made successful use of the flexibility contained in the system to determine inflation targets, using the concept of adjusted targets to reverse the trend in inflation and only then settting the inflation targets for 2004 (5.5%) and 2005 (4.5%). He also said that the Brazilian experience shows that elevated levels of inflation over long periods end up becoming the lower limits of inflation. "The Central Bank cannot sanction the process of the return of inflationary inertia in Brazil. We didn't do this in the past, and we won't in the future," he assured.

Meirelles argues that the facts are showing that the strategy of adjusted targets considered that monetary policy would be able to make inflation move in the direction of the long-term targets. "Both the BC's forecasts and analysts' expectations have shown that predictions for future inflation are moving into line with trends in the targets."

He cited that, in January, the adjusted target for the next 12 months was 8.5%, while the market's expectation for the same period exceeded 12%. The most recent results, according to Meirelles, predict a rate of 6.75%, in line with the trend in adjusted targets for the coming 12 months, 7.2%, according to the calculation made in May, but which corresponds to a 7% inflation in terms of the calculation made in June."

"The fight against inflation is a constant effort, and, based on recent results, we believe that monetary policy should continue to be based on guidelines that guarantee that the deceleration in inflation can be sustained. Under the system of inflation targets, the BC is basing its decisions on a convergence towards the mid-point of the target set by the National Monetary Council for 2004, which is 5.5%," he affirmed. (DAS)