O Aperfeiçoamento do Regime de Metas de Inflação no Brasil

The inflation target regime has been criticized in Brazil since its adoption in 1999. However, in its eighth year, we believe that its benefits are bigger than its problems.Particularly, the criticism made to it during the first years, even being right in some cases under the initial circumstances, may not be valid any more when the country isheading to the fourth consecutive year of successive reductions of inflation, with anincrease of the CPI close to the target. Instead of eliminating the regime, the beststrategy is to think about mechanisms of improvements in order to adopt apermanent approach, with a horizontal band (stable target) like in the countries witha mature regime. Having this in mind, the paper proposes a formal autonomy of Central Bank in 2011, with a stable target, in a context where, among other things, a) the monetary authorities wide their horizon of reference to a period 24 monthsahead; b) the Law of Autonomy of Central Bank make explicit the aims of stimulating the increase of GDP and employment and reducing the volatility of production; c) the Central Bank has huge international reserves in order to inhibiteventual speculative attacks; d) the National Monetary Council (CMN) incorporates a higher number of Ministers; and e) the Monetary Policy Committee (COPOM) includes external members with right to vote and gives voice - with no vote - to the representation of the Ministry of Finance. These elements would place Brazil, in thenext decade, within the group of countries with the best practices in inflation targeting, with a band from 2% to 4%, like in Chile. In that occasion, more than one decade and a half after the launching of the Real Plan, it would be an objective notonly defensable but also perfectly plausible.