Datafolha: Brazilian approves Lula’s pressure on BC – 02/04/2023 – Market

“I want to know what the Central Bank’s independence was for”, “just read the Copom letter for us to see that this increase in interest rates is shameful”, “you need to take care of monetary policy, but you also need to take care of employment, inflation and people’s income.”

In the first months of his third term, President Luiz Inácio da Silva (PT) has made harsh criticisms, such as these, of the president of the Central Bank, Roberto Campos Neto, for keeping the Selic, the basic interest rate, at 13.75 % per year.

The Copom has kept the Selic at the current level since September 2022, when it interrupted a cycle of 12 consecutive hikes.

Under the argument of controlling inflation and bringing it to the target, Campos Neto has said that the BC’s decisions are technical and based on expectations of future inflation.

In interviews and speeches since taking office, Lula has criticized the monetary authority, autonomous since 2021, pointing out that interest rates in Brazil are unable to attack inflation that is not caused by increased demand and still brake economic growth.

In this scenario, Datafolha asked Brazilians, on the 29th and 30th of March, how they evaluate the current level of the Selic.

The president’s questions seem to find an echo in the population. For 71% of respondents, the interest rate is higher than it should be. Among those who think so, 55% say it is much taller than it should be, and only 16% think it is a little taller.

Even among PL voters, the party of former president Jair Bolsonaro, who nominated Campos Neto for BC, the perception that interest rates are higher than recommended is 77%. Among the regions of the country, this opinion is only below 70% in the Northeast (67%).

Already 17% of Brazilians say they believe that basic interest rates are at an adequate level, only 5% answered that it is lower than it should be, and 6% did not know how to respond.

Specifically on Lula’s pressure to reduce interest rates, the survey also found that 80% of those interviewed said they thought the president was doing well. For 16%, the representative acts badly, and 5% did not know how to respond.

Support for President Lula on this topic is greater among Brazilians who earn up to two minimum wages (R$2,604), a range in which 85% say they agree with the PT.

It is also like this among those with up to elementary school (84%), the unemployed and not looking for a job (91%) and those who declare themselves black (84%).

Among those with higher education, 24% say that Lula acts badly when pressuring the Central Bank; among entrepreneurs, 28%; among those who declare themselves white, 19%.

“Saying that the interest rate should be at 26.5% to meet the inflation target, as the BC president did, shows the size of the stupidity they did back there”, says Luiz Carlos Mendonça de Barros, former director of the Central Bank.

For Clemente Ganz Lúcio, sociologist and coordinator of the Forum of Union Centrals, the discussion on the direction of the economy reflects the differences between the Brazil that Lula found when he took office in 2003 and now, in 2023.

“There is inflationary pressure, but we have a crazy monetary policy from the point of view of growth. Society expects immediate responses from the government, and, clearly, the Central Bank has a different response. As a result, the country has a brake on the economy like no other.”