Bank council Member Downplays Minimum Wage Employment Impact, Shifts Focus to Labor Market Solutions
A recent presentation by a Vice President of the Bank Council (BC) addressed a study examining the impact of the minimum wage on employment, characterizing the effect as “not so great.” The official acknowledged that three models were used in the report’s preparation, noting that a broader model, accounting for demand effects, “gives an even lower effect.”
While acknowledging the rigor of the study, the BC member cautioned against definitive interpretation, stating, “That study was done in a rigorous way, but it is indeed a way of looking at the data, there might potentially be other interpretations.” She further emphasized the inherent complexities of economic analysis,adding,”the economy is a social science,not an exact science. So, there are different ways of looking at this.” The presentation was framed as “a contribution…for the discussion.”
The Vice President actively sought to move the conversation beyond debate over the study’s findings and towards proactive solutions for the labor market. “I believe that what would be engaging is that rather than entering this conflicting average thing, what can be done will be thought,” she stated. A key focus was addressing high unemployment rates among women, advocating for measures like the final approval of a Cuna Sala (daycare) program to facilitate female workforce participation.”Unemployment is also very high in women. We have to think about other measures such as finally approved a Cuna Sala, to facilitate women who can work,” she explained. She urged candidates to prioritize unemployment reduction, calling it a “super big challenge.”
Inflation Outlook & Monetary Policy
The presentation also covered inflation, wiht the Vice President expressing relative calm regarding expectations, wich she said were “ironed” at 3%. She indicated that excluding the impact of electrical rates, inflation would be “about 3%-3.5%.” though, she acknowledged a “yellow light” caution regarding a recent rise in the underlying component of inflation, as noted in the BC’s IPOM report.
Positive developments were also highlighted,including the recent thankfulness of the peso against both the dollar and multilaterally,which she suggested could lower inflationary pressure. The impact of “Carry Trade” activity by Brazilian Hedge Funds on the exchange rate was recognized,but she noted that this activity “seems that they are not doing so much” currently.
Acknowledging increased market volatility, the Vice President stated, ”I think the variables are more volatile, indeed.” This volatility contributed to the BC’s decision to “wait, accumulate more data, see what happens in the next data, especially IPC,” before making further monetary policy adjustments. The governing interest rate remains at 4.75%,described as “slightly restrictive” as it is “a little over what is estimated is the neutral interest rate.”
Regarding economic growth, the BC projects a range of 2.25%-2.75% for the year, averaging around 2.5%, a figure consistent with projections from the Treasury.
