Brazil central bank chief says governments must address fiscal issues to avoid market disruption
(Reuters) – Brazil’s central bank chief, Roberto Campos Neto, said on Tuesday that governments need to start addressing fiscal issues, noting a current lack of coordination that is starting to bite, even in advanced economies.
“If we’re not able to address that in a way that people look forward in terms of the market prices and see that at least we have an equilibrium in the medium term, we might have a disruption in markets before we get the disinflation process,” he said at an event in Marrakech hosted by the Emerging Markets Forum.
Campos Neto raised concerns about potential repercussions if the global disinflation process is halted at a higher level, with implications for emerging market countries.
He questioned the driving forces behind a possible disinflation process, considering factors such as persistently high oil prices, the expensive nature of the green energy transition, and the lack of productivity gains.
“When we look at all these factors, the one thing that stands out is that people think that we’re going to have labor slack coming and that is going to contribute to lower inflation, but this is far from guaranteed,” he said, adding that market liquidity is dwindling amid deteriorating U.S. credit default swaps.
