BC president says he believes directors appointed by Lula will do ‘pragmatic work’ against inflation

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With the autonomous Central Bank, approved by Congress in 2021, president and directors have a fixed mandate of 4 years. Campos Neto, for example, will remain in office until the end of 2024. The president of the Central Bank, Roberto Campos Neto, stated that he believes that the new directors appointed by the government of President Luiz Inácio Lula da Silva will do a “pragmatic job” in controlling the inflation after his departure. Lula has already nominated Gabriel Galípolo and Ailton Santos to the BC and will have other nominations to make until the end of his term, including the presidency of the Central Bank. Campos Neto has a mandate until the end of 2024. “I believe that the Central Bank’s framework is very technical and, if it has a very different line of thought from the target system, I think the framework will indicate to the new directors that this is a way that the technical staff does not agree. But I don’t think so, I don’t believe that. I believe that, in the end, regardless of who sits in the body chair, that we will have a pragmatic work that is very influenced by the staff of the BC that are of excellent category”, declared Campos Neto, in an interview with Veja magazine. With the autonomous Central Bank, approved by the National Congress in the Jair Bolsonaro government in 2021, the president of the institution has a four-year term, which does not coincide with that of the President of the Republic. BC directors also have fixed mandates. After the announcement of two directors in May, Lula is expected to make two new nominations for the BC’s board of directors by the end of this year. Interest cut In early August, the Monetary Policy Committee (Copom) of the Central Bank decided to reduce the Selic rate, from 13.75% to 13.25% per annum. It was the first cut in the basic interest rate in three years, which occurred after an improvement in inflation in recent months and also amid strong criticism from President Luiz Inácio Lula da Silva. The decision was taken by the majority, with Campos Neto tying the score in favor of a greater reduction – which was implemented. The two new BC directors, Gabriel Galípolo and Ailton Santos, appointed by President Lula, participated in the last Copom meeting and voted for a greater reduction in interest rates. How the decision is made To define the basic interest rate and try to contain the rise in prices, the Central Bank is already aiming, at this moment, at the target for next year and at the objective, in 12 months, for the beginning of 2025. This is because changes in the Selic rate take between six and 18 months to have a full impact on the economy. In the communiqué, the Copom also said that, in the next meetings, it may continue making the Selic “reduction of the same magnitude”, that is, cuts of 0.5 percentage points. “Confirming the expected scenario [de desinflação e ancoragem das expectativas em torno da meta de inflação]the members of the Committee, unanimously, foresee a reduction of the same magnitude in the next meetings and assess that this is the appropriate pace to maintain the contractionary monetary policy necessary for the disinflationary process”, informed the BC.

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