Brasília, June 25, 2003 (Agência Brasil - ABr) - On Tuesday (24), the National Monetary Council (CMN) approved a readjustment of the inflation target for 2004, to 5.5%, calculated according to the Broad Consumer Price Index (IPCA), with a tolerance intervals of 2.5%, plus or minus. For 2005, the target continues to be 4.5%, with the same tolerance intervals.
Despite these tolerance intervals, the Minister of Finance, Antônio Palocci, emphasized that the government does not intend to exceed the 5.5% target. "There is no adjusted target any more. We will pursue the 5.5% target as the main goal of the target for 2004. Our efforts will not be focussed on the interval." He recalled that the target is determined with intervals to take into account eventual economic shocks, such as the one that occurred last year.
Palocci recalled that the adjusted target of 5.5% had already been publicized in January and that his announcement was merely making this readjustment definitive. "We said, then, that, considering the shock suffered by Brazil last year, it would not be suitable for the country to return to the previous targets, of around 4%, in a very short period of time," he pointed out.
The target set last year for 2004 was 3.75%, with tolerance intervals of 2.5%, plus or minus.
For the Minister, the 5.5% target is possible and in line with market expectations. "A lower rate would constitute an additional sacrifice for the economy, and, therefore, a decline in the GDP (Gross Domestic Product). A higher rate would make no sense, since the data on inflation and expectations for the future converge on the target," he explained.
According to Palocci, the new targets are consistent with the goal of a 3.5% growth in the GDP in 2004, as determined by the Budgetary Guideline Law (LDO). For this year, the government is working with a growth forecast below the 2.8% projected last year. The expectation for growth in 2003 runs around 2%. "There is a lack of symmetry in the economy, insofar as we are still recovering from last year's shock," he said.
The Minister also recalled that "other big decisions" in the area of micro-credit and financing, which will also stimulate the economy, should be announced tomorrow by President Luiz Inácio Lula da Silva.
The prospects for economic growth, including the reduction of interest rates, will also depend upon the behavior of economic actors with respect to the inflation targets, Palocci said. "This effort cannot be made only through monetary policy. It is a route that should be pursued with the coordination of monetary policy, but through the activities of all economic actors."
At Tuesday's (24) meeting, the CMN also approved the maintenance of the Long-Term Interest Rate (TJLP) at 12%. This rate is reviewed every three months, and the Council takes into account the forecast of inflation for the next 12 months and the country risk premium. (DAS)
