The Central Bank of Brazil maintained the rates and ignored Lula’s request

He Central Bank of Brazilchaired by Bolsonarista Roberto Campos Neto, he ignored the orders of the president Luiz Inacio Lula da Silva and decided to maintain this Wednesday the basic interest rate of the economy at 13.75% per yearconsidered the highest real rate in the world by consultants.

The decision of the Central Bank’s Economic Policy Committee was made known after the government, political parties and social movements described as recessive the strategy of the monetary authority to achieve the annual inflation target in 2023, which is 3.25% per year. , with two tolerance points.

Lula had accused Campos Neto of wanting to keep “hostage” to Brazil and to be a “irresponsible” with the prospect of expanding public spending to invest in the areas of social programs, health and education.

In a statement, the Central Bank took into account to maintain the Selic rate, as this index is called, the inflationary pressures warned by the financial market in the Focus Bulletin that the monetary authority publishes every Monday.

Besides, The members of the Central Bank highlighted the “instability” generated by the bankruptcy or financial distress of banks in Europe and the United States in recent weeks and the “uncertainty” due to the lack of a fiscal framework for the Lula government, placing itself in the traditional position of the opposition.

The government is preparing a new fiscal framework that must be approved by Congress.

Lula’s questions and stiglitz

Own Lula had asked the Central Bank to reduce the rate of interest in January, when Campos Neto decided to keep it.

According to the government, the inflation suffered by Brazil is from supply and not from demand, with which increasing the interest rate will cause credit to become more expensive, a possible recession and an increase in government spending to pay the holders of sovereign bonds and of debt securities.

Lula He received in his campaign the support against the interest rate from the powerful president of the Federation of Industries of the State of São Paulo (Fiesp), Josué Gomes, and from the 2001 Nobel Prize in Economics Joseph Stiglitz.

“This interest rate benefits rent-seeking and is a death sentence for the economy,” Stiglitz said. in Rio de Janeiro, while Gomes described it as “pornographic”.

Campos Neto has a legal mandate until 2024 at the head of the Central Bank by virtue of a law approved by the Bolsonarismo at the request of the federation of private banks so that the monetary authority does not depend on the Executive Branch elected at the polls for the first two years of government.

Roberto Campos Neto president central bank of basil.jpg

The president of the Central Bank of Brazil, Roberto Campos Neto.

Fábio Rodrigues Pozzebom / Brazil Agency

The head of the Central Bank was appointed by the then president Jair Bolsonaro and admitted that he gives financial advice to members of the cabinet of the government that ended on December 31, 2022.

Lula’s chief of staff, Rui Costa, affirmed that the 13.5% interest rate was installed with inflation of 10.5% year-on-year, but now there is falling inflation, of 5.5%.

“The economy is being suffocated, Brazil has the highest real interest rate in the world and that has no explanation,” he said.

According to the consultancies Infinity Asset Management and Mone You, Brazil has continued since June 2022 with the highest real interest rate in the world. The real discounted inflation rate is 6.94%, above Mexico, Chile, the Philippines and Indonesia.

The interest rate has become a political issue and the president of the PT, Gleisi Hoffmann, as well as the unions, have called for the resignation of the head of the Central Bank, an ally of Bolsonaro and his former Minister of Economy, Paulo Guedes.