Brazil’s government considers bringing forward inflation target debate – sources
Brazil’s economic team is considering bringing forward the country’s inflation targets to defuse tensions between the central bank and President Luiz Inácio Lula da Silva, who has been publicly pushing for lower interest rates, according to two people with knowledge on the matter.
The National Monetary Council (CMN), the government body in charge of setting such targets, traditionally debates the matter in June, when it is expected to set a target for 2026.
But Lula’s growing complaints that interest rates of 13.75% are choking the economy have led members of the economic team to advocate bringing that discussion forward and possibly raising the targets, currently set at 3.25% for 2023 and 3% for the following two years, said the people, who requested anonymity because the discussion is not public.
According to the people consulted, Central Bank President Roberto Campos Neto would favor a higher target.
He sits on the Council, along with Finance Minister Fernando Haddad and Planning Minister Simone Tebet.
The next Board meeting is scheduled for February 16.
The Central Bank declined to comment.
The Ministry of Finance has informed it does not foresee agendas or topics to be discussed at the CMN.
Lula da Silva, who faces a weakened economy that threatens his ability to deliver on campaign promises, has recently intensified criticism of the Central Bank.
He has questioned a law that granted the bank its long-sought autonomy in 2021 and has called on businessmen to join him in protesting the level of rates.
In a televised interview on Jan. 18, the president said the ideal inflation target for an emerging country like Brazil is 4.5%, the same as during his previous two terms in office.
Even if he agrees to raise the inflation target, the monetary council is unlikely to reset the target to 4.5%, as that level would contribute to the indexation of the Brazilian economy, one of the people said.
On the other hand, they said a slightly higher inflation target would allow the central bank to start cutting interest rates more quickly.
The monetary authority has said it will keep the Selic prime rate at its current level until inflation expectations return to target.
With information from Bloomberg
More: Brazil news in English, every day from The Rio Times.
Editorial responsibility: Matthias Camenzind, Editor-in-Chief · Editorial standards · Report an error