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Montevideo, December 14th 2024 - 18:22 UTC

 

 

Brazilian markets relief: Lula da Silva will respect Central Bank's autonomy

Tuesday, February 14th 2023 - 10:49 UTC
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Institutional Relations Minister Alexandre Padilha said the government is not considering ways to cut short the terms of central bank chief Roberto Campos Neto Institutional Relations Minister Alexandre Padilha said the government is not considering ways to cut short the terms of central bank chief Roberto Campos Neto

Brazil’s Real remained stable after one of President Luiz Inácio Lula da Silva’s cabinet members said the administration will respect a law that gives autonomy to the central bank despite the president’s growing attacks against the monetary authority.

Institutional Relations Minister Alexandre Padilha told reporters that the government isn’t considering ways to cut short the terms of central bank chief Roberto Campos Neto or any of the bank’s board members, who are now protected by the autonomy law.

“There is no discussion in the government to change the current central bank law and no pressure to cut short any mandate,” Padilha told reporters after a meeting with Lula and party leaders.

Lula has escalated his feud with the central bank over the past few weeks, saying that interest rates at 13.75% make it “impossible“ to boost growth, that the bank’s autonomy law is “nonsense” and that Brazil should have a higher inflation goal. Currently, the country targets price increases of 3.25% in 2023 and 3% for the next two years. Annual inflation stands at 5.87% after consumer prices rose slightly less than expected in January,

Prices as measured by the benchmark IPCA index were up 0.53% last month, slowing down from December and below market forecasts of 0.57%, government statistics agency announced.

On an annual basis, inflation reached 5.77% in January, down from an increase of 5.79% in the previous month and also below market estimates of 5.8% - although still above the central bank's target for this year.

Jayro Rezende, treasury director at Bank of China Brasil SA, said Padilha’s comments gave a boost to local assets in the short term, “but it takes more than words to normalize prices consistently.”

Lula is the first Brazilian president who’s unable to pick a central bank chief after congress approved a law giving the institution its long-sought autonomy.

“The president is expressing the pain and the anxieties of those who want lower interest rates in the country so that businesspeople can invest more,” Padilha said.

The central bank has kept rates on hold since September after an aggressive tightening cycle, in which policymakers hiked the benchmark rate from a record low of 2% in March 2021.

Categories: Economy, Politics, Brazil.

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