Lula Asks Central Bank Chief to Reflect on the Economy, His Role

(Bloomberg) -- President Luiz Inacio Lula da Silva kept pressure on the central bank to lower Brazil’s interest rates, saying on Tuesday that the head of the autonomous monetary authority still has a chance to “grow more mature and think about how to take care of the country.”

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The leftist leader, speaking to reporters from news outlets he considers friendly to his government, said Roberto Campos Neto owes an explanation to congress for keeping interest rates high and hurting the economic recovery, not to him. Lula is the first Brazilian president who’s unable to pick a central bank chief after congress approved in 2019 a law giving the institution its long-sought autonomy.

“People who believed that an independent central bank was going to change something in Brazil have to look at whether it was worth it or not,” he said.

Lula has escalated his feud with the central bank over the past few weeks, saying that interest rates at 13.75% make it “impossible“ to boost growth, that the bank’s autonomy law is “nonsense” and that Brazil should have a higher inflation goal. Currently, the country targets price increases of 3.25% in 2023 and 3% for the next two years. Annual inflation stands at 5.87%.

Lula said he hopes Finance Minister Fernando Haddad and Planning Minister Simone Tebet are “looking into what’s going on” at the central bank as policymakers pledge to maintain rates at the current level until inflation expectations return to target. Both ministers and Campos Neto have seats at the National Monetary Council, the body responsible for setting Brazil’s inflation targets.

Earlier on Tuesday, Campos Neto defended the bank’s autonomy, saying it allows for monetary policy to be “disconnected” from political cycles. “The more independent you are, the more effective” when conducting monetary policy, he said at an event in Miami.

Read More: Central Bank Forges Ahead With Hawkish Tone on Rates

Despite Lula’s criticism, Haddad celebrated what he considered as a change of tone in the minutes of the central bank’s latest policy meeting. The document released early on Tuesday was “more technical and friendly” as it noted the government’s plan to reduce the country’s fiscal deficit, the minister said.

--With assistance from Martha Beck.

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