The inflation targeting regime and the interest rate as a tool for monetary policy

Abstract

This article tries to understand the inflation targeting regime (based on the New Neoclassical Synthesis) and how it operates in Brazil. Special attention is given to the interest rate and its function in the inflation control. It is offered a post-keynesian approach as alternative to the New Synthesis. The conclusion is that the Brazilian inflation is due to costs (on the supply side), and not to demand, and that the inflation is controlled through the exchange rate, after variations on the interest rate.