Full employment brings inflationary concerns, says BC president

The president of the BC (Central Bank), Roberto Campos Neto, stated that the job market signals a scenario of full employment. According to him, the context is “big surprise”but it raises an alert for concern about possible inflationary pressure.

“The BC loves it when we have a full employment regime, when everyone who is looking for a job finds it, which is our current situation, which has improved a lot and was a big surprise”declared in an interview with CNN Brazil this Tuesday (April 30, 2024).

“The concern comes when companies are unable to hire, and you have to start raising salaries. If you raise wages for the same level of production, it means you are starting an inflationary process. So, the concern comes from there”he said.

The economist stated that the apprehension is greater around the services sector, with greater emphasis on intensive services, due to the demand for labor.

“There is this concern, because there is uncertainty about how the tight workforce influences the services part. [Esse indicativo de pressão inflacionária] appeared in 2 or 3 inflation numbers, but recently it has been a little better”he said.

Campos Neto argued that inflation is the “worst thing for inequality” and that its fight needs to be thought of as a social policy.

“Inflation generates great inequality. It means that those who have money can remunerate their money above inflation and those who have less money not only do not earn the same money but also have their purchasing power eroded on a daily basis.”he said.

According to the economist, the autonomy of the Central Bank is essential to guarantee better control.

Read below other statements from the BC president during the interview with CNN Brazil:

• global currency: “This debate is outdated. It will become old when we start to focus on global payment systems, which is a topic we are focusing on now. [Sobre a moeda chinesa yuan] I have a hard time thinking about it in our day to day trading of assets. It is very difficult to imagine that you will have a global trade currency in which the country will have much control. These things don’t go together.”
• globalization: “It’s becoming a segmentation. Globalization as we saw it in the past is in question. We have large trade groups. Asia doing less with the West and more with Asia. We start to see divisions. There’s a theme of electrification, which is Chinese cars that don’t enter in some places. It’s difficult to make a prediction.”
• United States election: “I have the impression that it doesn’t have that much of an impact on the market. I don’t think there will be a disruption in markets due to the election [do democrata Joe Biden ou do republicano Donald Trump]. There are some things, foreign policy that is different, the role of social programs that is different, but I don’t think there will be a major rupture.”