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Temer: Inflation control will have reflection on production and investment

Economy

For Michel Temer, inflation within the target should result in a "responsible fall" of interest rates in the country
published: Jan 09, 2017 12:00 AM last modified: Jan 10, 2017 01:12 PM
Beto Barata/PR President speaks during delivery of ambulances in Esteio (state of Rio Grande do Sul)

President speaks during delivery of ambulances in Esteio (state of Rio Grande do Sul)

President Michel Temer said on Monday (9 January) that the slowdown in inflation in 2016 will help recover production and foster new investments in the country. Speaking at an event in Esteio (state of Rio Grande do Sul), Temer said that controlled inflation should provide the conditions for a responsible drop in interest rates.

With inflation falling, interest rates will naturally decrease, which will, slowly, responsibly (...) encourage production and new investments in our country," said the president during a ceremony held for the official delivery of ambulances to municipalities.

Temer took office with 12-month inflation around 10%. Now, financial market analysts are predicting that inflation in 2016 will stand at 6.35%, below the 6.5% ceiling of the national target. The consolidated results for the National Broad Consumer Price Index (IPCA in the Portuguese acronym) for last year will be released on Wednesday (11).

In its last two meetings, the Monetary Policy Committee (Copom) reduced the benchmark interest rate (called Selic) from 14.25% to 13.75% p.a. The expectation among analysts is that the pace of decrease will accelerate over the new meetings. For this week's meeting, the Committee is expected to cut rates by 0.5 p.p.

Analysts also expect that inflation will be closer to the centre of the inflation target this year. For 2018, GDP growth is expected to reach 2.30%, according to projections released by the Central Bank's Focus Bulletin (a survey of several market analysts) on Monday.