Brazil's economy ministers: inflation spirals central bankers 'sleep on steering wheel'

Brazil's economy minister warned on Friday that Western central bankers were "sleeping on the steering wheel" as the economy fell into a high inflationary environment.

Brazilian Economy Minister Paulo Guedes said at an online event on the Davos Agenda that the inflation "beast" had escaped and would become a real problem.

"I'm afraid the beast has come out of its cage," Guedes said.

"I think central banks are sleeping. They should realize that inflation will soon become a real problem in the Western world," he said.

Guedes said inflation is far from temporary, as some central bankers have suggested, and that it can be a long-term problem for Western governments, who have left little room for maneuver.

In the case of Brazil, Guedes said, the country has moved ahead to curb the worst inflationary pressures by reducing last year's pandemic stimulus package.

Brazil's economy briefly recovered to pre-pandemic levels in 2021 and then slid down again.

"We have taken advantage of the recovery to gradually eliminate monetary and fiscal stimulus," Guedes said, adding that there is room for the government to react if a new wave emerges.

Guedes' comments stand in stark contrast to those of central bankers who believe that current inflation levels are temporary and manageable.

ECB President Christine Lagarde said on Friday that inflation in the euro area was unlikely to deteriorate sharply, and she believed the recent spike in inflation was due to short-term pressures such as supply bottlenecks and energy prices.

Meanwhile, Fed Chairman Jerome Powell is widely expected to raise rates at the March meeting to curb rising inflation. The Bank of England took a similar move last December.

This article originated from the financial world