On Monday, President Lula criticized the country’s Central Bank chief, Roberto Campos Neto, for policies slowing Brazil’s growth.
“The Central Bank president is holding back Brazil’s economic progress, delaying job opportunities and wage increases for the people,” Lula stated during an interview with SBT television.
In 2023, Latin America’s largest economy expanded by 2.9%, but financial market analysts predict a slower GDP growth rate for 2024.
Campos Neto, appointed by Bolsonaro and serving until 2025, can be replaced by Lula next year.
Lula criticized the interest rate policy of Campos Neto, awarded 2022’s Latin America Central Banker of the Year, which stands at 11.25%.
“No economic reason for high rates; it’s just stubbornness,” Lula stated.
In 2023, Brazil’s inflation was 4.6%, meeting the Central Bank’s target, the lowest since 2020.
Background
High interest rates slow growth by making loans costlier and cutting investment and spending.
Central banks raise rates to control inflation, seeking a balance not to stifle growth.
Lula argues current rates are too high and that lower rates could boost growth without spiking inflation.
The truth varies with Brazil’s complex economic conditions, including fiscal policy and demand.
2023’s 4.6% inflation, within the Central Bank’s target, shows some success in inflation control.
However, Itaú, Latin America’s largest bank, anticipates tougher inflation and a higher Selic rate by year-end, suggesting Campos Neto’s cautious approach may be necessary.
The bank raised its end-2024 Selic forecast to 9.25% from 9.00%, expecting rate stability amid service inflation worries.