President Luiz Inacio Lula da Silva is expected to delay a plan to boost Brazil’s inflation targets after central bank chief Roberto Campos Neto offered an olive branch to his administration, according to government officials close to the leftist leader.
(Bloomberg) — President Luiz Inacio Lula da Silva is expected to delay a plan to boost Brazil’s inflation targets after central bank chief Roberto Campos Neto offered an olive branch to his administration, according to government officials close to the leftist leader.
Lula, who has publicly pushed for higher targets as a way to force policymakers into cutting interest rates, discussed the issue with Finance Minister Fernando Haddad on Tuesday, said one of the people who requested anonymity because the discussion wasn’t public. The meeting followed Campos Neto’s pledge to do everything he can to bring the central bank closer to the government.
While the president remains adamant that Brazil’s 13.75% interest rates need to come down to allow the economy to recover, Haddad managed to avoid bringing the discussion on inflation goals to this week’s meeting of the national monetary council, the government body responsible for setting them.
“Inflation goals are not on the council’s Thursday agenda,” he told reporters at the end of the day, referring to the next regular meeting of the body that’s comprised of himself, Campos Neto and Planning Minister Simone Tebet.
Haddad repeated Lula’s criticism that the current level of interest rates is an obstacle to growth, but added that the central bank chief acknowledged that the government is taking appropriate fiscal measures that will eventually make room for rates to fall.
His nod to the central bank reflects the positive impact from comments made by Campos Neto during an unusual TV interview Monday night, said a person familiar with the situation. In that interview, the bank’s chief warned that easing inflation targets would make it harder to tame price increases in the future.
After meeting with Haddad, Lula had yet to make his mind about whether to increase Brazil’s inflation targets, said a high-ranking adviser to the leftist leader. The president didn’t order this year’s 3.25% goal to be increased, the adviser added, requesting anonymity because the discussion isn’t public.
Brazilian markets bounced back on Tuesday, with the real paring early losses that had been triggered by an earlier report from local news agency Estado saying Lula had ordered a 1-percentage-point increase to this year’s target. A spokesman for Lula later called the report a “rumor.”
Lula’s criticism of high interest rates is likely to continue, however, as it reflects a dominant view among members of his Workers’ Party, some of whom have been calling on Campos Neto to resign.
(Recasts story with details of Lula’s meeting with Haddad.)
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