Brazil Central Bank Criticism Broadens Before Interest Rate Decision

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(Bloomberg) -- Brazil’s central bank is coming under renewed fire from a broad range of top government officials and business leaders clamoring for an interest rate cut next week, when policymakers are widely expected to keep borrowing costs unchanged for a seventh time.

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There’s “no reason” to justify borrowing costs at 13.75%, President Luiz Inacio Lula da Silva said during a local media interview on Thursday. “People are not buying anything,” and there’s no demand-driven inflation, he said.

The current Selic is “hurting” activity and employment, as real interest rates rise with lower inflation, Vice President Geraldo Alckmin said a day earlier.

Calls for looser monetary policy echoed remarks from high-profile executives this week. There’s “great hardship” in the retail sector, Jorge Goncalvez Filho, president of the Institute for Development of Retailers, said on Wednesday. He demanded a “short-term reversal” on interest rates, as companies face challenges keeping up sales and accessing credit.

Earlier in the week, Magazine Luiza SA’s Luiza Trajano called for an immediate rate cut bigger than 25 basis points during an event alongside central bank chief Roberto Campos Neto. Small and medium companies “can’t take it anymore,” she said, as there’s a surplus of goods throughout the sector.

Central bankers led by Campos Neto are seen holding the Selic at a six-year high of 13.75% on Wednesday. While board members have faced government criticism for months, business leaders from different sectors of the economy are now growing vocal about tight monetary conditions.

Read More: Brazil Central Bank Says Inflation Bets Set Up Rate Action

Policymakers could signal they are ready to discuss rate cuts after annual inflation eased for the eleventh straight month to 3.94% in May, further within the tolerance range. Core measures stripping out energy and food items are slowing down, and market consumer price forecasts are falling.

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