the WSJ reports,"some Brazilians have been wondering whether helping the poor could stoke an already irked beast: inflation.
The central bank seems to think the answer is no.
Brazil’s President, Dilma Rousseff, announced last month that a key income-distribution program will increase by 10% the monthly payments it grants to the extremely poor.
The program, known as Bolsa Familia, is prized by advocates for reducing Brazil’s infamous social gap and for bringing millions out of poverty and into a new consumer class".
"But critics say it creates new demand in the economy, which could fuel inflation. The increase in the monthly stipend was quickly seen as a possible reason for the central bank to step up borrowing costs, right when Brazilian consumers were hoping for a break".
“Our hypothesis is that the government’s fiscal performance will be neutral regarding its impact on prices,” central bank Economy Director Carlos Hamilton Araújo said Thursday, meaning that public spending is unlikely to get in the way of fighting inflation this year.
Mr. Araújo avoided any comments specifically about Bolsa Familia. He said his remarks were about fiscal policy overall, in a possible nod to government promises that any increase in public spending will be matched by either tax increases or cost cuts, so that fiscal targets are met.
His comments come at a time when most analysts expect the central bank to stop raising its basic interest rate known as Selic
