President Lula attacks the Central Bank of Brazil and high interest rates

The new president of Brazil, Luiz Inácio Lula da Silva, is so unhappy with the president of the Central Bank and his policy to contain inflation that he exploded in a public act. “There is no justification for the interest rate to be at 13.75%. Just look at the Copom letter [el comité de política monetaria] to know that this increase is a shame,” he said Monday in a speech. The president apparently expected the bank to lower rates at his meeting last week. The leftist wants a monetary policy that makes credit cheaper to revive economic growth.

Lula is aware that he won by the bare minimum and that his honeymoon with the electorate will be short. That is why she is in a hurry for her ministers to adopt measures with visible results in the short term and for the economy to offer optimistic signs as soon as possible.

This open confrontation also has a personal component. And it is that the head of the Government is very irritated with the president of the Central Bank, Roberto Campos Neto, who was appointed by Jair Bolsonaro and whose autonomy has been protected by law since the previous legislature. Campos Neto has defended that independence this Tuesday: “When more independent and effective [el Banco Central]the less the country will pay in terms of cost-benefit of monetary policy”, he declared at an event in Miami (USA).

This is the fourth time that the Central Bank of Brazil has maintained the price of money at 13.75%, but the first since Lula took office a little over a month ago. Among the arguments to justify his decision, the monetary authority mentioned the enormous uncertainty about the new government’s long-term fiscal policy and higher-than-expected inflation. The next price rise data will be known this Thursday.

Brazil’s was the first Central Bank in Latin America to react to the global phenomenon with aggressive rate hikes and today it has one of the lowest inflation rates. In December, the annual rate was 5.79%.

The Brazilian press recounts that Lula’s anger with the head of the Central Bank has contributed to the discovery, thanks to a photo published in a newspaper, that Campos Neto was still in a WhatsApp group with former president Bolsonaro and several of his former ministers, and Another gesture from three months ago: that he go to vote in the elections with a soccer team shirt, considered a Bolsonaro symbol. The press adds that it is not ruled out that the head of the Central Bank is dismissed on the grounds that the inflation targets were not met in 2022 and 2021, as on the other hand occurred in a large part of the planet.

The economic policy of the Lula government is still blurred. The Minister of Finance, Fernando Haddad, of the Workers’ Party, has not specified what the announced tax reform will be like or what instrument will replace the spending ceiling that Bolsonaro considered sacrosanct and repeatedly burst in line with the pandemic to alleviate hardships and win re-election. The center-right partners with whom the PT won the elections also lead important ministries for the economic future such as Industry or Planning.

Lula carefully chose in which forum to attack the Central Bank. It was in her speech during the inauguration of the new president of the public entity BNDES (the National Bank for Economic and Social Development), which will be led by a veteran PT leader, Aloizio Mercadante. The BNDES is one of the entities most hated by those who hate the PT, they consider it a financial arm to support ideological allies in the region and a key instrument in the economic errors of Dilma Rousseff. Lula, in his speech, accused Bolsonaro of defaming the financial institution and assured that both the Government of Venezuelan Nicolás Maduro and Cuban Miguel Diaz-Canel will pay the debts they have had with the entity for years.

During that same intervention at the BNDES headquarters, President Lula declared that the violent assault on the three powers, carried out by thousands of Bolsonaristas in Brasilia, was “a revolt of the rich who lost the elections.”

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