13,7% Interest rate Brazil criticized

New Measures expected

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Amsterdam, 26 March 2023– Brazilian President Luiz Inacio Lula da Silva criticized on Tuesday the country’s central bank, saying that an interest rate of 13.75% – its current level – is “irresponsible,” adding he will continue to fight the current level to stimulate the economy.

Brazil’s central bank has been holding its benchmark interest rate at a six-year high since September and, is expected to maintain it unchanged at Wednesday’s COPOM meeting.

President Lula defends a reduction in the country’s basic interest rate, the Selic, while banker Roberto Campos Neto prefers to keep it at 13.75%. Under the current chart of the Brazilian central bank, (approved under previous president Jair Bolsonaro), the terms of the chairperson do not coincide with those of the elected government. In effect Campos Neto constitutional term finalizes at the end of 2024.

Lula has repeatedly argued that the central bank autonomy as “nonsense”. the president said that if the Brazilian Central Bank’s autonomy brings “an extraordinarily positive thing”, it can be maintained. “What I want to know is the result of it. Will the result be better? An autonomous Central Bank will be better, improve the economy, great, but if it doesn’t improve, we have to change it,” he said.

Lula also anticipated a proposal for new fiscal rules but will be only announced after he visits China next week. The new framework is considered crucial to addressing fiscal concerns after Lula secured congressional approval for a multi-billion-real package that bypasses the constitutional spending cap to boost social spending and fulfill campaign promises.

Finance Minister Fernando Haddad had previously indicated the proposal would be unveiled this month, possibly even before the central bank’s rate-setting decision on Wednesday.

However, in an interview with local news website Brasil 247, Lula said it wouldn’t make sense to announce the fiscal framework and then travel to China.

“What I have been calling attention to is that we have to do things very carefully because we cannot lack resources for education and health,” said Lula, emphasizing that he would talk about the issue with Haddad during the trip. Lula will be in China from March 26-30.

Lula’s chief of staff, Rui Costa, said in an interview on Tuesday the framework would be announced in mid-April.

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