the process of monetary policy formulation and implementation. thus the importance of developing an appropriate analytical framework for monetary policy, including forecasts and the balance of risks to inflation, as well as the preemptive stance in the decision - making process of the monetary policy committee. in the current circumstances, there is a potential risk that economic agents start to attribute a higher probability that inflation increases will become persistent, a fact that would reduce the effectiveness of monetary policy. the central bank stresses that the performance of monetary policy tends to be more effective when the deterioration of inflation dynamics is in the early stages, rather than when it is more established. thus, monetary policy should respond immediately in order to avoid that initially restricted inflation pressures translate into an enduring deterioration in inflation expectations. recent decisions of the brazilian central bank should be understood in that context. their effects over activity and inflation – potentially helped by some liquidity tightening in progress since the first months of the year – are cumulative and will undoubtedly produce effects in the coming quarters. international evidence, as well as the brazilian experience under inflation - targeting, shows that there are no advantages of sustaining high inflation rates for long periods. on the contrary, high inflation rates lead to higher risk premia, to shorter planning horizons and consequently to lower potential growth of the economy. its most harmful outcome is the deterioration in income distribution, as low - income brackets are harder hit by the negative effect of inflation on their purchasing power. it is now clearer than ever that fighting inflation generates benefits in terms of decreasing poverty and reducing social inequalities. thus, the brazilian central bank has acted and will continue to act in order to bring inflation back to the midpoint target of 4. 5 % promptly, that is, during the course of 2009. this stance is designed to avoid the consolidation of a negative inflationary environment, in which monetary policy would lose efficiency. it should be clear to the public that the brazilian central bank will not have a complacent approach regarding inflation. the bank is committed to act in order to bring inflation to the midpoint target during 2009. this is the approach that minimizes costs for economic activity and for the society at large, contributing to consolidate a sound, efficient, and fair economic structure. thanks for your attention!

##fer long - term benefits on both the supply and the demand side of the economy ; a long - term tax reform with those ambitions would be desirable. in the present situation, however, with growth seemingly reaching around 3. 5 % this year and 3 % in 2000, tax cuts and labour market reforms that primarily favour the supply side would increase the opportunities for good growth without contributing to increased inflationary pressure. that would lessen the risk of overheating and facilitate the interaction of fiscal and monetary policies. there is the problem, however, that evidence of good results – be they in the national economy or in one ’ s own enterprise – tend to weaken demands for changes which are needed for more sustainable achievements. i would also say that the less one does in the good years, the tougher the going is likely to be when times are worse. not infrequently, necessary measures are not taken until a crisis is actually looming. today we are reaping the harvest from many important structural changes that were implemented during the crisis in the first half of the 1990s. it is up to every decision - maker to consider which measures we can now take in order to create robust long - term conditions for the economy.