Brazil had a decade of weak and largely incoherent monetary policy and another decade and a half of gradual change, attempts at stabilisation but recurring loss of control; it then adopted inflation targets in 1999, when its monetary instruments and arrangements were less than adequate, and had to move fast to get inflation targeting to work.
|Years||Targets and attainment||Classification|
|1974-85||central bank and Bank of Brazil together constitute the monetary authorities, with fiscal and developmental responsibilities as well as monetary policy; some indirect instruments but interest rates largely set by authorities, often at subsidised levels, in context of range of direct controls; extensive indexation (‘monetary correction’ at rates set by government, sometimes related to intended rate of depreciation); recurring fiscal dominance; attempts to control monetary growth rarely succeed; exchange rate heavily managed, i.e. repeatedly devalued in formal or irregular crawl, also major step devaluation 1979||unstructured discretion UD|
|1986-98||separation of Bank of Brazil from central bank ends fiscal responsibilities of central bank; series of unsuccessful stabilisation plans including currency reforms and price and wage controls; repeated exchange rate adjustments; recurring fiscal dominance; continued indexation; gradual move to more indirect monetary instruments||loosely structured discretion LSD|
|1999-2000||exchange rate floated under pressure, wide converging inflation targets adopted and met; main monetary instrument is now primary interbank interest rate (SELIC)||loose converging inflation targeting LCIT|
|2001-3||inflation targets overshot by large margin, and inflation expectations go outside target range||loosely structured discretion LSD|
|2004-17||wide (and relatively high) inflation targets mostly met, except 2015-16 when regulated price inflation spiked and inflation expectations went temporarily above target band; exchange rate floating; central bank independence remains weak||loose inflation targeting LIT|
Selected IMF references: RED 1980 pp40-2, 98-9; RED 1984 pp49-55, 83; RED 1986 pp1-6, 48-50, 78, 87-8; RED 1989 pp1-6; RED 1991 pp1-4; RED 1995 pp1-9; SISA 1999 chVI; SR 2000 pp36-8; SR 2003 pp14-15; SI 2005 chII; SR 2005 pp23-5; SR 2015 AppIV; SI 2016 pp115-40; SR 2016 p39; SR 2017 pp7, 36; SR 2018 pp11, 26.
Additional source: Bogdanski et al. (2000).
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