Brasília – The stronger flow of foreign capital into Brazil gives rise to challenges in the fight against inflation, according to the chairman of the Bank of Brazil, Alexandre Tombini, who is attending a public hearing at the Chamber of Representatives. To the chairman, the intense flow of capital into Brazil is “fuelling” the fast expansion of credit, at a time in which moderate growth is required.
Tombini stated that the strong increase in capital inflow impacts on asset prices and the exchange rate as well. He claimed, however, that Brazil needs foreign investment and is open to foreign capital, but that attention must be paid to the intensity with which it arrives at the country. The Central Bank chairman highlighted that the government has adopted macroprudential measures to “ponder and reduce” foreign capital inflows.
He also stated that the prices of agricultural commodities and oil are stimulating inflation in Brazil. The minister also said that in spite of the “strong increase in commodities prices,” the Central Bank still aims to have the inflation rate converge to the target, of 4.5%, with a margin of error of 2%.
*Translated by Gabriel Pomerancblum
