BRASILIA, Jan 31 (Reuters) - Brazilian President Michel Temer will not submit legislation to give more autonomy to the central bank this year, delaying the decision until the economy stabilizes in 2018 or 2019, a senior member of the government’s economic team said on Tuesday.
The official, who asked not to be named to speak freely, said the government will prioritize labor and pension reforms this year. He added that the central bank already has enough autonomy to independently decide on monetary policy.
“Our legislative agenda is already overloaded and it’s too premature to discuss this subject,” said the official who is directly involved in economic policy decisions. “We can start discussing that (independence) when inflation stays on target for some years and interest rates find an equilibrium.”
Although the Brazilian central bank enjoys administrative autonomy it is one of the few remaining major central banks in the world that is not fully independent.
The new legislation aimed give the central bank formal independence and set terms for its board members.
Central bank chief Ilan Goldfajn has said the legislation would help increase the bank’s credibility to battle inflation that has started to ebb after years well above the 4.5 percent center of the official target. Annual inflation eased to 6.29 percent in 2016 after reaching double digits earlier that year.
To add efficiency to monetary policy, the official said the government is working on a law to gradually raise the interest rate, known as TJLP, at which state development bank BNDES pegs its long-term corporate loans.
The government plans to change the way the TJLP is calculated to link it to government inflation-linked securities known as NTN-Bs, the official said. The TJLP currently stands at 7.5 percent, well below the central bank’s benchmark Selic rate at 13 percent.
The official added that it was too early to discuss a reduction to the official inflation target for 2019 as some analysts in the market have called for.
He said reducing the target could force the central bank to again tighten monetary policy at a time when the recovery remains feeble.
The National Monetary Council, comprised of the heads of the finance ministry, the planning ministry and the central bank, is due to announce its inflation target for 2019 by the end of June.
“That is a tough decision that we don’t need to take right away,” said the official. (Additional reporting by Daniel Flynn, Maria Pia Palermo and Patricia Duarte; Editing by Tom Brown)