Central Bank of Brazil research investigates control amid rising inflation trends


A recent working paper published by the Central Bank of Brazil concludes that central banks' freedom to reduce the output gap and maintain inflation at a steady rate is reduced if the inflation trend is allowed to rise.

The working paper, by Sergio Alves, studies the optimal policy choice when the inflation target is not preferred.

Cautioning against inactivity when the inflation trend is seen to rise, the research concludes that the output gap worsening can exacerbate inflation trend rises

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