We're going live now to Brasilia to watch some live images where the President of the Central Bank, Roberto Campos Neto, is giving his last press conference, speaking about the quarterly inflation report and the Central Bank's forecasts for various indicators for 2025. We'll see just a short clip of Campos Neto's speech, and in a little while I'll bring some highlights from his talk.
Macroprudential for financial stability, and the exchange rate is floating. The Central Bank should act in the exchange rate when it understands there is some dysfunctionality in the flow due to a specific operation, an extraordinary outflow, or some market factor. We understood that there began to be, through what we had been raising with the market, a larger, atypical outflow at the end of the year. The dividend part, you can see what percentage of dividends companies are paying. It was above the average. It's also true that companies had a larger result, so that also increases the flow. We started to notice that the financial flow, and we've been talking about this, the financial flow wasn't very negative.
Roberto Campos Neto is now answering some questions from journalists. The quarterly inflation report was already presented and released earlier. He is now highlighting some important points and answering some questions. Besides that, I want to bring some excerpts from Campos Neto's speech. He started by saying that today was his last meeting with the quarterly inflation report. He thanked the entire board and the Central Bank employees. He said he never believed in a reappointment and that he would stay until the end of his term, as is happening. He said he would always put institutional issues above people. That was his speech. He also highlighted that he always said he would make the transition as smooth as possible. Campos Neto, in some moments in his initial speech, recalling his trajectory and speaking a bit about this transition period, said that the Central Bank's transition was the most tranquil. At this moment, he says the transition was much more planned, regardless of political polarization. Gabriel Galipolo's weight was even more relevant in the last two meetings. I'm sure the Central Bank is very prepared. Campos Neto also said that Friday will be his last day at the Central Bank, which goes into recess, and that Galipolo will remain as interim until he officially takes over on January 1st. In the interview, Campos Neto will also answer possible questions about the past and about Galipolo's future. At this moment, he continues answering questions and answers from journalists. But this broadcast we are watching now, which traditionally every three months we see a Central Bank press conference about the quarterly inflation report, today has a farewell tone, marking the closing of this cycle of Roberto Campos Neto at the helm of the Central Bank, bringing very important statements now about what the future of the Central Bank will be. Let's listen a bit more.
He is responding at this moment. It can spill over to the interest rate in general, the long-term interest rate. So just putting this point that these two factors, intervention in the exchange rate, dominance through this contamination of interest rates, and it's not dominance, it's simply a search for a hedge that ends up having an alternative. Before I answer, I'm going to take this opportunity to thank Roberto. Roberto, in several meetings, he cited Powell, but it wasn't Jerome Powell, it was Colin Powell, who he cited saying about exercising influence in a meeting environment not by authority but by experience and advice. And I am a witness to the generosity that Roberto had throughout this entire transition process. Sometimes Roberto uses the word 'smooth,' sometimes I use 'generosity,' but the truth is that it was a transition between friends, it was very friendly, and Roberto was very, very generous in this process of passing the baton, throughout the process of giving freedom, in all meetings to be able to speak. It's important that Gabriel has a different weight now in the speech, that Gabriel has a different weight in the voting, and it was like that throughout these last meetings. So just to thank Roberto. I am very proud that you gave me this opportunity of going through this first transition of the BC's autonomy with the BC, thanks to what you are doing. And I am a witness that Roberto, in all meetings, acted with concern for the country, always thinking about what was best for the Brazilian economy and what was for the country and to strengthen us. And it is an honor for me to go through this transition, the first test of the BC's autonomy at a moment when we know with a polarized society as we know, but I think Roberto's grandfather would be very proud to know that he gave this contribution of demonstrating the institutional strength of the Central Bank at this moment. I think the Central Bank gives a great, great demonstration, and I thank you as future president and I thank you as a Brazilian for everything you did and as a friend.
Regarding the two reasons, first, as you rightly said, the materialization of some risks removed some uncertainty from our path, allowing us to see a little further ahead. Due to all the reasons presented here by Diogo, the size of the announcement we made of a 100 basis point hike and forecasting two more 100 basis point hikes made sense and makes sense for the budget we imagine is necessary at this dose and at this pace that we announced here. So I think what is important to say is that I think there is no doubt that the Central Bank took a clear step in the direction of putting the interest rate at a restrictive level with some security. We are walking in this direction, and that was the movement we intended to make with the guidance and the 100 basis point hike. Just to reinforce two things, these questions, let's continue here. Yes, yes, but just quickly, so we are expecting more interventions.
So Gabriel Galipolo, the future president of the Central Bank officially from January, brings an appreciation, speaks about this transition period, thanks Roberto Campos Neto at this moment, said it was a transition between friends, that Roberto Campos Neto was generous, thanked him as president, as a friend, as a Brazilian citizen. In this transition period, we know there were many speculations about what it could be or how it could be, if it would happen smoothly or not. Both Campos Neto and Gabriel Galipolo leaving clarity about this transition period for a Central Bank to continue very secure in this dynamic of policy and responsibility with the inflation trajectory, the target. Therefore, when Campos Neto emphasizes that in the last two meetings Gabriel Galipolo's weight was very important, that is, an official appreciation from Roberto Campos Neto who is practically saying goodbye to his activities, and from Gabriel Galipolo for this transition, for this moment of closing the cycle, and clearly what he will lead from here on during his presidency at the Central Bank. It is a traditional moment of questions and answers for those who are always following or for those who follow the press conferences.
In this sense, very clear definition of the Central Bank's responsibility to converge inflation to the target, which by the way was the speech we heard from Gabriel Galipolo and from the guidance, because this inflation report brings precisely this projection of increased inflation ahead and the importance of these interest rate increases already contracted going forward. We also have at the Central Bank... there is a journalist, sorry, a colleague journalist who is asking a question. We are therefore in these moments of questions and answers. We shouldn't see more speeches from the future president of the Central Bank and now from Roberto Campos Neto, who has already made it very clear that Friday will be his last day. After that he leaves, Galipolo assumes there temporarily, from January Galipolo stays as president of the Central Bank. So for you and for those who are arriving now here on our program on CNN Brasil, this quarterly inflation report is released and we brought here earlier some highlights about it because it brings a whole view of monetary policy and also of course the Central Bank's projections for the main economic data of Brazil. Let's listen a bit more.
So Roberto Campos Neto is now answering some of our... and worsening. And obviously we always discuss what is the best way to gain credibility. In the end, our objective is to gain maximum credibility, to make sure we have maximum convergence in expectations, doing it as smoothly as possible. So that's always what's in our conversations. And then depending on the volume of how much you see the deterioration, it becomes more important for you to do something more front-loaded or you simply say, look, I think it's sufficient but it needs a more prolonged period. When you start doing an analysis that that rate, with the models and projections, even for a prolonged period, as far as you have visibility, is no longer sufficient, it becomes necessary to tighten, that is, increase the pace or do something more front-loaded. I understand that what we tried, the message we tried to pass, is that we think the elevation of 100 basis points with this signaling is an important step on the path to signal that the Central Bank is committed to reaching the target and understands that we have greater uncertainty than usual, and also understands that some uncertainties have become certainties. It's not binary, but when we think in levels of gradation, some uncertainties are not as strong because they have already materialized, so it has become a more adverse scenario. So I think that's what I can say in this sense, and then pass to Gabriel. But just regarding the exchange rate, I think I spoke a little, we look at the year-end flow, there's always a slightly larger outflow because there are dividends, there are remittances. Generally we can see what the payout is, that is, what percentage of companies are paying in dividends on top of profits. Companies have flexibility in terms of how much they will send, sometimes they send more, sometimes less. We have a perception that dividend sending is larger, it's typical. Besides that, there are other types of flows, operations on the Ptax that are a bit larger too, and we saw more recently a flow of people taking money out of the country, including on platforms that are, as I said, smaller volume operations, but are atypical operations in the volume they are happening.
Thank you. Roberto, I think there are two that serve here for me. The question about the change in the level, I think you were talking about the change in the guidance when you said the level, was that what you were saying? What are the implications of that and if it will be maintained prolonged, besides having started the cycle. And the first point, I've already used, I think throughout this year and a half that I've been here, several nautical metaphors to talk about monetary policy. I've already spoken of a navigator who sees 1,000 nautical miles ahead, I've already spoken of not fighting the sea. So I'm going to resort, it's not very original, you have some thousands of years since the beginning of civilization, but I'm going to say also that there are no good winds for Manaus without direction. And we have clarity about where we are going, taking the step that we took. I think it was already quite courageous, from the materialization of risks, to be able to make this signaling for two more meetings ahead. What will happen from there on, I think we'll have to wait to see how everything unfolds. But the fact is, as Roberto said very well, it's very clear in which direction we took this step, it is in the direction of walking towards an interest rate at a restrictive level with some security. And about what needs to happen, maybe it will sound a bit funny for me to say this, but you know that I'm quite attached to guidance. So I think the bar is high, the bar is high for us to make any kind of change in the guidance.
Good morning, President, Director. I have some questions here. Going back a bit to this question about the exchange rate, the market situation in general, in the government we've heard a lot of the expression 'speculative attack.' I wanted an evaluation from you gentlemen, if you agree with this thesis that there is an attack.
We're hearing the colleague's question, the journalist's question. I'm going to highlight for you two important points from both Roberto Campos Neto's speech and also Gabriel Galipolo's. Roberto Campos Neto, who started speaking about the exchange rate issue, saying that we are indeed mapping the outflow day by day and will continue monitoring. We understand that at this moment the Central Bank needs to act as we are acting. We cannot answer if there will be new interventions. Therefore, that matches exactly with what we have been seeing in our daily lives. At this moment we have a journalist, the colleague asking about speculation, something we had already been discussing with you earlier in the CNN Live programming. At the moment we had a Central Bank intervention, it was what made the dollar reverse its direction for a fall. Now it follows at 5.98, the dollar quoted at this moment at 6.10. Let's listen then to what Director Roberto Campos Neto will say about exchange rate speculation.
I think we can talk a little about this topic, and I'm going to respond. You asked a question based on what has been said, I'm going to respond to what I say here together here at COPOM and also when eventually the Central Bank is called by the government to clarify issues of this type. I think it is not correct to try to treat the market as a monolithic block, let's say, as if it were one thing that is coordinated moving in a single direction. It's enough for us to understand that the market usually works with opposing positions, for there to be a market there needs to be someone buying and someone selling. So every time the price of some asset moves in some direction, you have winners and losers. So I think the idea of a speculative attack as something coordinated doesn't represent well. I think we can be explaining how the movement is happening in the market today, and I say this, I make a point of underlining that this is what I repeat in all meetings when we are called, because this interpretation of mine is well understood and accepted in my conversations, whether with Minister Fernando Haddad, or with Minister Simone Tebet, or with Vice President Geraldo, and with the President of the Republic, with the President himself, who agrees when there is this dialogue with him. I think sometimes there is a lot of noise from the communication point of view, and it's normal for this type of noise to happen, but I think it's important to clarify this view, and that at the end of the day, it's always up to everyone on this side to try to do the best job possible to encourage those asset prices that behave better the better the economy and society are doing to present advantages for those who made that type of view.
Regarding the fiscal issue, your question, our standard response is always that response, which is what really matters to us. We are analyzing how the market analyzes the fiscal theme and how that reflects in prices. But you asked a question, okay, but how are you seeing it? And I'm going to do the same thing, I'm going to repeat what I've been saying in meetings, whether here internally or in meetings with other interlocutors or even with the government. I think the theme of the difficulties and problems of Brazilian public accounts, they have already been being treated for some time in the literature, whether as an efficiency issue, or as a tax justice issue, or because we have budget rigidity, or because there are complex growth rules. So this is a theme that has been around for some time. I understand that all of you know, and the market and academia know, that it is very difficult for you to present any type of fiscal project or program that will be a silver bullet that will be able to address all these problems that exist during this entire period in the short or very short term. And so I think it's always important, and I feel this in the conversation I have with President Lula, with Minister Haddad, a recognition first of the diagnosis that there are indeed fiscal problems to be addressed in the country, then that no program that will be announced will be a silver bullet that will be able to solve these programs. They should indeed be a demonstration of recognition of the problem and the diagnosis and steps in the right direction, one more step in the right direction. These spaces will always present the need for debate with society, with Congress, which a democratic process demands. Many times this will make these projects move at a speed that is not exactly the speed we would all like, but these are the pains of democracy, and as I've said several times, I prefer these pains to any kind of false shortcut. Having said that, recognizing that no program will be sufficient in isolation to address the problem, it's also important the recognition that I also feel in the dialogue I have with President Lula and with Minister Haddad, that this is a continuous work, that this is a continuous work that should remain and continue, and that today there is an effort by the government to try to get approval in Congress of what is there in this dialogue that is necessary with society and with Congress. So on one side, I transmit here what has been my speech and how I see also when the Central Bank is called, and it's not up to the Central Bank to make any kind of orientation, communication on behalf of the government or suggestion. The Central Bank is always called to transmit what view it has of what is happening with assets in the market and what is causing that, and try to bring that view because the Central Bank is closer to speak. But that's what I have in my conversations, and on the monetary policy side, monetary policy will always be in a beauty contest. We are much more betting on how people see and think who is the winner of the beauty contest, and not who we think matters for monetary policy, how the market and real prices react based on the interpretation it has of what is happening in fiscal policy.
Just a quick point regarding, there was a question about when you sell reserves, do you think about debt? No, it doesn't come up in the debate at any moment when we are discussing policy among ourselves. And the question of spillover to interest rates, how to react to this side effect, and the question of whether you rule out an intermediate swap. Gabriel answered this question previously, saying that he understands that the guidance has value and intends to follow the guidance, and that the bar is very high. Regarding the spillover, what I meant is that we have, and sometimes a rush, a search for a hedge. So there is a perception of a change in risk parameters, and sometimes a company or an investor or someone doing some productive activity understands they need to make a hedge, either because of cash flow or because they're making a future forecast. And then when you make an intervention, the intervention has to have two things: it can't be too small so that it has no effect and you continue generating market dysfunctionality or liquidity dysfunctionality, and it can't be too large so that people feel that instrument lost its hedging capacity, because if people perceive it lost hedging capacity, they will look for another instrument that is a proxy of that one and that has the country risk mirroring, and they will hedge in another instrument. So that's the spillover. We don't act in the exchange rate looking at that. Obviously we talk with the Treasury, we say, look, we understand there's a problem here, sometimes the dysfunctionality is in the pre-fixed or in interest rates, sometimes the dysfunctionality is more in the exchange rate. More recently it even showed that the dysfunctionality in the interest rate in terms of liquidity was even greater than the dysfunctionality in the exchange rate. But our task here is to look at the exchange rate, identify the flow, see the dysfunctionality, and act always passing the clear message that we don't do this for debt, nor to guarantee prices, nor with a monetary policy bias.
Thank you. Alex, Valor Econômico. Good morning. I wanted to recapitulate here some important excerpts from the speeches of both Gabriel Galipolo at this moment and also Roberto Campos Neto regarding the dollar. The dollar at this moment falls in relation to the opening, already 14 cents. We opened today, hit the high of 6.28, we had a Central Bank intervention, 5 billion dollars auctioned, the dollar fell again, now at this moment it's at 6.14, a drop of... Not trying to treat the market as a monolithic block, also the idea of a speculative attack as something coordinated doesn't represent well what has been happening. My interpretation is well understood and accepted in my conversations with Haddad, Simone Tebet, Geraldo, and with Lula. There are noises, this happens, but it's important to clarify... work possible. Regarding the fiscal scenario, Galipolo said he is seeing how the market analyzes the theme. It's important to remember that in the minutes of the last COPOM meeting, this was also pointed out, how the market has received the fiscal package, which was not a good reaction, and that this had an impact on asset prices. Galipolo also said that difficulties have been being treated for some time, including since the history of management, says there is no fiscal program that is a silver bullet that solves in the very short term and in the agile time we want it to be solved. There is a democratic process that needs to be respected, and of course in this same period we can see situations like this that have been happening, for example with the exchange rate. Galipolo said it's important to say that the work being done is to put to approve what is in Congress.
Let's continue then. So, a security, whether you have in the broad spectrum that there is discussion of the neutral rate, what is the neutral rate you have. So we are walking in this direction, and I commented as Roberto spoke about the guidance having a high bar. Regarding the exchange rate, I think the point you tried to touch is, look, it may be that there really has been, we may be in a phase of an atypical flow, but it may be that this atypical flow is a hedge, and if this atypical flow is a pure and simple hedge, and why don't we do the intervention in the swap and instead we do it in the spot? Well, because what we are seeing is that we have a larger dividend outflow, and we also had resource outflows. We are seeing resource outflows, including more recently, individuals in smaller volumes. This is not actually a search for a hedge in itself, it's a hedge in terms of a hedge that manifests itself through the physical outflow of the exchange rate. But that doesn't mean we won't act going forward. We always look at the demands, look at the flows, see what is mapped on the Ptax, what is the physical outflow in fact, and we choose the best instrument. I think we have freedom among the instruments, and at no point are we giving the perception that we will only act in one or the other instrument. We will analyze case by case. Until now the analysis was that it was important to act in the spot because of the type of flow we were seeing. And if that calls more speculators, I think I don't like the word speculators. I think Gabriel already spoke about this. I think the market is a set of prices, and it's a set of prices that tries to reflect opinions, and not just from financial investors, but from real-world investors. As I said, people doing hedges, people doing long-term projects. So we don't look at it in that sense. We are simply trying to see if that movement has some dysfunctionality, if there's a liquidity gap, if something happened in a period that already has a very atypical flow. This means there is no price defense, but rather an interpretation at that moment that if the Central Bank doesn't act, the dysfunctionality could lead to a market reaction that could have been combated by an intervention, and that's what reserves are for. Again, always saying it's not for doing monetary policy, not for managing public debt, but indeed to combat market dysfunctionality.
Thank you. Gabriel, Timóteo, Exame. Let's go, I'll try to translate for you what Roberto Campos Neto wanted to say there, questioned by journalist colleagues about these auction movements that have been executed by the Central Bank. The Central Bank has several modalities of auctions, among them those spot auctions that were several that happened now, which are those where the Central Bank puts money in the market without a repurchase forecast. There is the currency hedge, which in translation to our language would be the following: people, investors, whether individuals or legal entities, seeking to buy dollars as a protection movement, and we've already talked a lot about this here with you. When this happens, this search for an asset that has more protection tends to also bring the rise of the dollar. But at this moment we also have a seasonality of increased demand because of increased exchange rate remittances. So there Roberto Campos explained a bit about this strategy of what has been done in the auctions and that none of these auctions was targeting or aiming at monetary policy. Let's go back now to listen to Gabriel.
I also think it goes in the direction of responding to what you were commenting. What I think is important about the fiscal theme is a bit of what I was answering to Fábio here. This is a process that really, the debates with society and with Congress sometimes really demand a time that is proper, natural, and welcome of the democratic process. But we know that in the financial market, things also impose themselves. The speed, you are forced to walk at that speed, that will exist. I think what is very important, and I'm here simply transmitting what my reading is, given the position I'm in today and that I'm called eventually to have dialogues, is to clarify the communication. The clearer the communication from all of us here in the government is in this sense, that there is indeed a continuous process that has to be done to resolve the issues involving this theme. Just one point on the exchange rate, I think our action in recent times shows exactly that our action is not to, let's say, go against a perception of worsening risk premium, but rather a perception of flow dysfunctionality. So much so that we had several movements of perceived worsening of risk in recent times where there was no action at all, including at some moments with strong complaints from several. So I think the Central Bank's historical action shows that our function is not to combat a perception of worsening risk premium, but rather to understand why we are seeing the dysfunctionality, what its characteristic is, and if it's a case of dysfunctionality where providing liquidity makes the process more organized. The intention is not to change the course but to organize the process, avoiding dysfunction in exchange rate trading.
Sheila, Platina BR. Let's go then. Look, Roberto Campos Neto brought some more points here. He said that when we see reserves, we don't think about when we sell reserves, we think about debt or purely also in terms of monetary policy to determine the basic interest rate. There are the dysfunctionality issues that in some moments really require interventions as has been happening. Intervention cannot be so small that it has no effect, nor so large that it removes the perception of a hedge or protection as we call it in the market. Again, every time we talk about currency hedge, we are wanting to say that are investors buying currency, buying dollars as a way to have an asset that really doesn't depreciate and doesn't appreciate. He also said it was necessary to act in the spot because of the type of flow that has been happening, trying to explain these movements, these auctions that are being chosen. And again, I repeat for you, besides a search for the exchange rate, a physical outflow of currency which is traditional in this period also of increased remittances by companies, which traditionally in this period already increases this demand for exchange rate, which is what we usually see. So very important statements regarding the exchange rate at this moment, both made by Roberto Campos Neto and also by Gabriel Galipolo, including on this speculation point that Campos Neto himself came to say, what's here on the screen for you, I don't like the word speculation because the market is not a single entity that can coordinate an action in such a way to say that this is just a speculative moment. So statements including from Roberto Campos Neto himself, we also followed Gabriel Galipolo pointing on this exchange rate issue, and at this moment we continue following the continuity of the press conference, this one that was a press conference for the quarterly inflation report. Let's listen again to Roberto Campos Neto.
In terms of reaching our main goals, that's what we've been doing. So we understood it was important for us to be united, communicating well, working well together, making a smooth transition process. And I don't think there is any kind of problem with the Central Bank's action. I think the Central Bank has done everything it can do, understanding the market dysfunctionality that exists, and this period we are going through where there is some uncertainty regarding fiscal policy, the Central Bank is doing what it can do. We have a language that is very common among central bankers, which is when you're the only game in town, meaning you're the only one fighting for credibility. I think it's not up to the Central Bank to make an evaluation of that, but rather to think how can I act to improve credibility as much as possible. If there is sometimes a perception of lack of credibility in fiscal policy, obviously we try to make a much more careful movement here to gain as much credibility as possible in monetary policy, so that in terms of future perception, credibility improves. But obviously the Central Bank cannot act alone. So I think that's an important point, a point we've been saying, and I think it's not up to us to make an evaluation of fiscal policy because again, what's important, I think Gabriel mentioned this, is how the perception of fiscal policy impacts macroeconomic variables that are important for our daily lives. We may even have a perception of fiscal policy, but if the market has a very different perception and the impact of that perception acts on our reaction function in a different way, that's how we'll have to make the interpretation, because that's how our model, our reaction function works. I'll pass to Gabriel to complement.
I'll give two brief answers, maybe if Diogo wants to complement something. Yes, the Central Bank has all the necessary tools to pursue the target and reach the target. Yes, both from the technical point of view of monetary policy and from the institutional point of view, even because you commented on other issues. The Central Bank has full autonomy, has the full confidence of the President of the Republic as well. You commented a bit on these comments, the President allowed full autonomy in the choice of directors and throughout this process. And even Roberto was very delicate and kind here in speaking about how the last two meetings went. All directors gave full support for us to take the lead in the decision-making process of what would happen in this swap and including in the guidance. Many times we see, it depends on who you like more, if you like Roberto more or me more, you'll think it was the fault of one or the other, and if you like the decision that was taken or not, you'll think the fault was one or the other. And Roberto was very clear in the meeting that he understood this was a meeting where the responsibility should be left with me, that my voice had to have a distinct voice. And I thank Roberto and all the directors, it's a privilege to have this board of directors and to be able to share and...
