Campos Neto: ‘Lower interest rates depend on fiscal shock’ – 10/02/2024 – Market

The president of the Central Bank, Roberto Campos Neto, said this Wednesday (2) that the federal government needs to make some positive fiscal shock move so that the country can return to living with lower interest rates.

According to him, the cooling of the Selic was observed in some other moments in recent Brazilian history. Campos Neto cited the surplus achieved during the first term of President Luiz Inácio Lula da Silva (PT) and the approval of the spending ceiling, the pension reform and, more recently, the fiscal framework.

“There is a recent topic which is the transparency of the fiscal number. Many people question whether the numbers are transparent, especially with regard to the calculation of the primary. We have been saying that it is very important that the primary expresses a fiscal effort in the current year “, he said during an event by Veedha Investimento and Aurum in São Paulo.

This year, the Lula government changed the fiscal target of 2025 and stopped forecasting a surplus for next year. The objective now is to bring the primary deficit to zero.

According to official data released in the 2025 Budget proposal and in the fourth revenue and expenditure assessment report of this year’s Budget, President Luiz Inácio Lula da Silva (PT) is expected to end his term with an effective fiscal deficit in the four years of his administration.

“It’s very difficult to think that we will be able to work with lower interest rates, in a stable manner, without having the prospect of debt convergence”, said Campos Neto at the event.

The BC president also stated that an artificial drop in interest rates would lead to a correction for inflation. This, according to him, would cause a transfer of income between people from different social strata.

“When inflation rises, the debt also improves, because the collection is nominal. But this adjustment, when it is made via inflation, is a transfer of income from those who cannot protect themselves from inflation to those who can protect themselves; a transfer of income from the poor to the rich.”

Also during the event, Campos Neto listed the main challenges for the global economy. According to him, other countries also face challenges such as debt and high interest rates, in addition to the structural change in the workforce caused by the pandemic.

According to the head of the BC, the world is going through a period of low productivity, with gains concentrated in the technology sector in the United States. In Brazil, with the exception of agribusiness, the scenario is also bad, he said.