Monetary Policy

Flashcards about monetary policy, inflation targets, and the role of the Central Bank.

What is the primary goal of monetary policies?

To control the quantity of money and credit in circulation and interest rates to manage the economy's liquidity and control inflation.

What fundamental objective does the Central Bank (BC) pursue?

To maintain inflation under control, around the target established by the National Monetary Council (CMN).

What is the main instrument of monetary policy used by the Central Bank?

The Selic rate, decided by the Copom.

How does maintaining a low, stable, and predictable inflation rate contribute to economic growth?

It fosters sustainable economic growth and improves living conditions by allowing better planning for companies and families.

Who is most affected by high inflation?

Low-income families, as they have more difficulty protecting themselves against the loss of the real value of money.

What are the benefits of low, stable, and predictable inflation?

Reduced economic uncertainty. It allows people to plan their future better, and prevents the erosion of real income, fostering economic growth.

Since when has Brazil adopted the inflation targeting regime?

1999

Who defines the inflation target in Brazil?

The National Monetary Council (CMN).

What price index is used for inflation targets in Brazil?

The Broad National Consumer Price Index (IPCA), calculated by the Brazilian Institute of Geography and Statistics (IBGE).

What happens if inflation falls outside the tolerance interval?

The president of the BC must publicly disclose the reasons for the non-compliance and the measures to ensure the return of inflation to the established limits.

What are the key elements of the inflation targeting regime?

Public knowledge of the inflation target, central bank autonomy, transparent communication, and accountability mechanisms.

Who defines the target for the annual inflation?

The National Monetary Council (CMN).

What does Copom define to maintain inflation under control?

The target for the Selic rate.

Who performs open market operations to influence the Selic rate?

The BC (Central Bank)

How does the Selic rate affects the overall inflation?

Through various channels in the economy.