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For André Lion and Jerson Zanlorenzi, changing the inflation target now is like “changing the grade to pass the test” and can undermine economic credibility.
According to André Lion, partner and CIO of equities at Ibiuna Investimentos, discussing a change in the inflation target during a time of economic pressures is a dangerous strategy. For him, the rule must be followed even in adverse scenarios, as loosening the target amid uncertainty is equivalent to changing the grade to pass the test.
Jerson Zanlorenzi, creator of Morning Call and head of the equities and derivatives desk, agrees.
In his view, altering the inflation target weakens market participants’ confidence and has the opposite effect: currency instability, loss of credibility, and increased pressure on prices.
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Why The Inflation Target Is Central
The inflation target is the parameter that guides the Central Bank’s monetary policy. It defines the desired level for prices and guides decisions regarding the Selic rate.
When interest rates remain high for extended periods, the intention is to slow down the economy and consequently reduce inflation.
For experts, opening the discussion about the target in a time of fiscal and monetary uncertainty sends a negative signal to the market.
Instead of reinforcing discipline, it suggests that the government is choosing shortcuts to escape responsibility.
The Risks of Changing the Rule Mid-Game
In Lion’s view, changing the target when it is not being met opens the door for new revisions.
The result would be a surge in expectations that, in a short time, would lead to inflation rates well above acceptable levels.
“If you change from 3% to 4%, soon they’ll be aiming for 5% and then 8%,” he warns.
Zanlorenzi emphasizes that confidence is as important as the execution of economic policy.
Changing the target in an uncertain scenario generates a domino effect: loss of credibility, a rise in the dollar, and even greater inflationary pressure.
When The Change Would Be Acceptable
Experts acknowledge that discussing the inflation target makes sense in stable environments. The analogy is clear: a roof should be repaired on sunny days, not during a storm.
Thus, the debate can take place in a context of controlled inflation, when there is room to assess the costs and benefits of a revision.
However, they insist that today Brazil needs to prioritize fiscal discipline and the effectiveness of public spending, rather than opening a front of instability by questioning the target regime.
The Importance of The Central Bank’s Communication
Another point emphasized by Zanlorenzi is that the communication of the Central Bank is as important as the decision itself.
Expressions in minutes and speeches guide market expectations and can open the door for future flexibilizations, but in a transparent and predictable manner.
Therefore, he argues that changes in language should be cautious and calibrated, without sending market signals of improvisation.
The warning from André Lion and Jerson Zanlorenzi shows that tampering with the inflation target in a turbulent scenario can be costly.
For them, the credibility of the system is an asset that can be lost quickly and takes a long time to rebuild.
And you, do you think changing the inflation target would be a necessary step to stimulate the economy or a trap that would bring more uncertainty?
Leave your opinion in the comments and join the debate.
Mudar a meta da inflação as vésperas das eleições é uma atitude eleitoreira