Luiz Inacio Lula da Silva is only interested in bringing down Brazil’s interest rates, and the government never discussed changing central bank rules or firing its chief Roberto Campos Neto, according to one of the president’s key allies.
(Bloomberg) — Luiz Inacio Lula da Silva is only interested in bringing down Brazil’s interest rates, and the government never discussed changing central bank rules or firing its chief Roberto Campos Neto, according to one of the president’s key allies.
Lula, who has repeatedly criticized the central bank for keeping interest rates at 13.75%, wants to openly discuss the country’s monetary policy, which he sees as an obstacle to economic growth and investment, Institutional Relations Minister Alexandre Padilha said. At the same time, the president is steering clear of any interference with the autonomy of the central bank, like he did in his first two terms in office, Padilha said in an interview.
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“President Lula doesn’t want to bring down anyone, he wants to bring down interest rates,” he said in his cabinet in Brasilia on Thursday.
While Lula has openly argued the country should increase its inflation target — a debate currently at play in both emerging markets and developed nations, including the US — he did not ask the National Monetary Council to do so, Padilha said. The council, which is composed of Campos Neto, Finance Minister Fernando Haddad and Planning Minister Simone Tebet, met on Thursday. The gatherings of the so-called CMN are not public, but the statement issued about it late yesterday made no reference to inflation targets.
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“The whole world is discussing inflation and inflation targets,” he said. “This can’t be a taboo.”
Fiscal Rule
The government’s priority in the first year of Lula’s new term is to move forward in congress with the new fiscal plan that will replace Brazil’s most important spending rule, a cap that limits growth in public expenditures, as well as an overhaul of the tax system. Both houses of congress are on board with the economic agenda from Lula’s government, according to Padilha.
“There is a good environment in congress, amid all parties, to pass the tax reform and the new fiscal plan,” he said, including part of the opposition.
Haddad has promised to send the new fiscal blueprint to lawmakers by March. Padilha said the proposal needs to be approved before the 2024 budget bill, which has to pass by the end of the year. The best-case scenario would be for the government’s fiscal plan to clear congress by July, according to Padilha, a former lawmaker himself.
Brazilian markets have been bogged down this year by lack of clarity on public outlays after congress authorized Lula to boost expenditures on social programs. The president’s harsh criticism of the central bank, calling into question the need for its autonomy and bashing Campos Neto for keeping rates at a six-year high, has added to investor jitters.
Read More: Lula Tones Down Attacks on Brazil Central Bank as Relations Thaw
Days after Campos Neto gave a rare TV interview pledging to work with the administration, Lula toned down his criticism of the top policymaker on Thursday, while also slamming the nation’s financial sector for overreacting to his government’s actions.
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