Lula: If inflation target is wrong, ‘change the target’ – 06/04/2023 – Market

President Luiz Inácio Lula da Silva (PT) once again mentioned the possibility of changing the inflation target, with the objective of holding interest rates in Brazil.

Lula made the statement at a breakfast with journalists this Thursday (6). At the end of the conversation, however, he said that he was just discussing a speech by the president of the Central Bank, Roberto Campos Neto, and that he does not intend to fight with the head of the institution.

Lula was referring to a hypothesis raised by the BC president. Last week, Campos Neto stated that, in order to meet the current inflation target, interest rates should be at 26.5% per year – well above the current 13.75%. Campos Neto thought that would be impossible.

The petista criticized the BC’s hypothesis and interest rate policy. He then stated: “If the goal [de inflação] is wrong, the goal is changed”.

“These days, I read a sentence that I don’t know if it was said by the president of the Central Bank that, to reach the 3% target, 20% interest would be needed [Campos Neto falou em 26,5%]. I don’t know if that was true, but at the very least it’s unreasonable. because if the goal [de inflação] is wrong, the goal is changed”, he said.

The center of the official target for inflation in 2023 is 3.25% and, for 2024, 3%, with a tolerance margin of 1.5 percentage points, more or less.

At the end of coffee, Lula said that he was referring to a hypothesis and that he does not want to discuss the goal.

“I said I wasn’t going to discuss the goal, because this is a problem with the autonomy of the Central Bank and the Senate, which approved the autonomy of the Central Bank. [Campos Neto] that it has its autonomy, and that the Brazilian people keep analyzing it”, he said.

The inflation target, however, is not determined only by the president of the Central Bank. Who defines the percentage is the CMN (National Monetary Council), composed by the president of the BC and by two ministers: Fernando Haddad (Finance) and Simone Tebet (Planning). The government, if it wanted to, would have a majority to make a change.

Lula had already mentioned this possibility in January, in an interview with GloboNews. Shortly afterwards, however, Haddad stated that the target would remain as it is. The CMN endorsed the decision.

Over coffee with journalists, the president recalled having established and met goals in his past administrations, maintaining a good relationship with the Central Bank.

“I’ve already been president of the Republic. I’ve discussed with the Central Bank. I’ve already set a goal for this country. We’ve already met the goal. If you set a goal for your life and don’t meet it, then you’re lying to yourself,” he declared.

Lula stated that he does not intend to “keep fighting” with the BC president. “It was the Senate who nominated him. In two years, a new president of the Central Bank will be discussed.”