BRASILIA (Reuters) – Central bank governor Roberto Campos Neto is set to give a high-profile televised interview on Monday on Brazil’s monetary policy that has been questioned by President Luiz Inacio Lula da Silva, who has repeatedly called for higher inflation targets.
Lula’s stance has given rise to speculation about a potential increase in official targets at Thursday’s meeting of the National Monetary Council (CMN), Brazil’s top economic policy body.
On TV Cultura’s Roda Viva program, Campos Neto will be the first central bank chief interviewed since Arminio Fraga in 1999, under Fernando Henrique Cardoso’s administration. The program will be aired at 10 p.m. (0100 GMT)
Lula has criticized the country’s benchmark interest rate, calling it an obstacle to economic growth at its cycle-high of 13.75%, which was kept unchanged earlier this month.
The leftist president has argued that Brazil has the highest real interest rate in the world, unjustifiable in the face of slowing consumer price rises, and that the country should increase its inflation targets.
The CMN typically decides the inflation targets in June but can anticipate such calls. It comprises the finance minister, planning minister and the central bank governor, meaning the federal government has two of three votes.
Lula’s comments have led to a deterioration of inflation expectations and a steepening of the yield curve, prompting policymakers to emphasize that the deviation of inflation from targets prevents them from starting to cut its Selic rate.
This year’s inflation target is 3.25%, falling to 3% in 2024 and 2025, in all cases with a 1.5-point tolerance band. Private economists surveyed weekly by the central bank project inflation at 5.79% in 2023, 4% in 2024, and 3.6% in 2025.
But some economists released a manifesto to support questioning the current interest rate level and Lula’s political allies continue to echo the president’s remarks, from calls from his Workers Party (PT) leader in the lower house to a street protest in front of the central bank on Tuesday.
“Uncertainties about the economic policy’s commitment to low inflation, including the autonomy of the central bank to pursue the inflation targets set by the CMN, have raised doubts about the current monetary regime,” said Mario Mesquita, chief economist at Itaú.
(Reporting by Marcela Ayres; Editing by Andrea Ricci)
