Campos Neto says that part of the inflation is above the target and minimizes Lula’s criticism

Despite having reduced the basic interest rate by half a percentage point and signaling further falls this year, the president of the Central Bank, Roberto Campos Neto, says that the “fight against inflation has not been won” and that part of it is still being fought. “well above target”.

Since the beginning of the new government, the head of the monetary authority has been a constant target of criticism by President Luiz Inácio Lula da Silva (PT) and other PT leaders. Something that Campos Neto downplays and considers normal in the “Central Bank autonomy process”.

According to him, the recovery of the pace of the economy is lower than expected and still demands a restrictive interest rate policy. The basic interest rate is at 13.25%, decided at the beginning of the month during the first meeting of the Monetary Policy Committee (Copom) with the two new directors appointed by the government.

“The fight against inflation is not won. A part of it is still well above the target. The service sector is improving, but not to the level we would like. This scenario demands a restrictive interest rate environment”, he said in an interview with the magazine Look Published this Friday (25).

Campos Neto had already mentioned this concern last Tuesday (22) during Banco Santander’s Annual Conference, that the improvement in some inflation indicators is still timid.

The head of the monetary authority reaffirmed that the Brazilian Central Bank was the first in the world to raise the interest rate when necessary and was one of the first to lower it, and that the “interpretation of the global situation has been privileged”, with the inflation still persistent in other countries.

The last time the basic interest rate was reduced took place in August 2020, in the midst of the most acute phase of the Covid-19 pandemic. The cycle of increases later until it stopped at 13.75% generated criticism and Campos Neto was even called “tinky” and “stubborn” by Lula.

Campos Neto minimized the criticism and said that the president has the right to criticize, but that he himself is only one vote among nine Copom directors.

“It is part of the Central Bank’s autonomy process, which is now being tested. After all, it is the first time that we have the conjunction of bank independence with non-coincident mandates between the Chief Executive and the monetary authority”, he said, noting that differences between the president and the monetary authority also occur in other countries.

Unlike Lula, Minister Fernando Haddad, of Finance, has always sought to adopt a less critical tone in his relationship with Campos Neto, which the president of the Central Bank considers to be a “good interlocution”, and that there is a “government effort” to cut costs structurally. However, the need to increase revenue to meet the targets may still have some barriers.

“The minister is trying to do a difficult job on the fiscal side. Historically, the country has struggled to cut costs structurally. I see a government effort along these lines. Now, it will have to approve measures to increase tax collection and that is where we observe some uncertainty”, he added, noting that the market forecasts a deficit of 0.8% of GDP (Gross Domestic Product) in the public accounts of 2024, which the government intends to zero .