“Inflation is most regressive tax as possible”

While central bankers meet in Portugal from June 27 to 29, Luiz Pereira da Silva, number two of the international regulations bank, warns of the danger of switching to a high inflation diet.

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With the great return of inflation, central banks are at the heart of the debates. The European Central Bank (ECB) is organizing its large annual forum in Sintra, Portugal from Monday, June 27, in particular, bringing together the bosses of the Federal Reserve (Fed), the ECB and the Bank of England. At the same time, the International Regulations Bank (BRI), an international body nicknamed the “central bank of central banks”, published its annual report on Sunday, June 26. Luiz Pereira da Silva, his general vice-director, warns of the danger of switching to a high inflation diet.

inflation reached 8.1 % in the euro zone, 9.1 % in the United Kingdom , 8.6 % in the United States. How to face it?

I come from a developing country, I am Brazilian. I have a particularly lively memory of what inflation is. It is the most regressive tax as possible: it is pouring out wages, it affects the life of the poorest, it weighs on the purchasing power of employees, it prevents to project themselves into the future. It is therefore necessary to do everything to prevent inflation from changing diets, that is to say to increase to sustainable and high prices, which spreads throughout the economy. This requires anchor in the anticipations of economic agents, in the heads of people, that this situation will not last. How to do it ? It is the work of central banks to bring inflation back to a low and stable level. They are all acting. They have the experience and the instruments to achieve this.

Brazil experienced hyperinflation in the 1980s and 1990s, then peaks at almost 20 % in the early 2000s, and today Eight still 12 %. Tell us about the impact it had …

Inflation first affects the poorest, employees, people who do not have the possibility of protecting their income by financial tools indexed on the rise in prices. This means much greater instability in investment decision, lower growth … We face uncertainty about its income at the end of the month, its purchasing power, the right investment to be made in the ‘economy. This is why central banks have a decisive role to play.

We must see them as providers of a common good, namely financial stability and prices. It is this common good that allows you to think about long -term growth. It is a base that allows you to engage in structural reforms with much more social consensus. Again, believe in the experience of an emerging country: to carry out reforms for growth in times of financial instability and prices is something very difficult, if not impossible. You must first set up the foundations of the house before you can discuss the rest …

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/Media reports.