LONDON, April 21 (Reuters) – Brazil’s central financial institution Governor Roberto Campos Neto mentioned on Friday that the financial institution’s independence is essential for the nation’s financial system, as political stress mounted for it to cut back borrowing prices.
President Luiz Inacio Lula da Silva and different politicians have pressured the financial institution to decrease benchmark rates of interest, which stand at a six-year excessive of 13.75%. However Neto, talking on the Lide Brazil Convention in London, defended the financial institution’s actions.
“What we do is for technical causes, not political causes,” Campos Neto mentioned, including that reducing rates of interest “solely works on credit score if there’s credibility.”
“Up to now we minimize rates of interest and as a substitute of elevating credit score, it fell, as a result of there was no credibility to make that transfer,” he mentioned.
Campos Neto additionally mentioned he would not assume that inflation is being pushed by provide constraints, defending excessive rates of interest and the technical targets the financial institution is utilizing to find out its actions.
Brazil has an inflation goal of three.25% for 2023, which might be lowered to three% in 2024, however client costs reached 4.65% within the 12 months by way of March. The central financial institution’s subsequent financial coverage committee is on Could 2 and three, based on its calendar.
Campos Neto mentioned that the Brazilian central financial institution made the largest rate of interest hike in world historical past throughout an election interval, which “reveals that the central financial institution is kind of impartial.”
“We had been very impartial through the (presidential) election course of. If we hadn’t elevated rates of interest through the elections, inflation could be increased,” Campos Neto mentioned through the Lide Brazil Convention in London.
Shortly earlier than Campos Neto spoke within the London convention, Senate chief Rodrigo Pacheco brazenly criticized excessive rates of interest throughout the identical occasion, arguing that prime charges had been hurting progress.
“I’m positive that the central financial institution might be very a lot succesful to cut back rates of interest”, Pacheco mentioned.
Campos Neto mentioned that he would not assume that the financial institution’s independence is beneath menace, and added: “The controversy about rates of interest is a standard factor. We have to enhance the communication of that we do, how we make determination.”
Lula earlier this month hinted at a possible goal change, calling excessive lending prices within the nation “inexplicable” as he continued his push for decrease rates of interest.
“Central financial institution timing is technical and is totally different from political timing. The price of preventing inflation is excessive, however the price of not preventing inflation is way increased.”
Reporting by Libby George, enhancing by Jorgelina do Rosario
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