Lula says that Brazil does not need to have an inflation target “so rigid”

President Luiz Inacio Lula da Silva said, this Thursday (29), that Brazil does not need to have a system of inflation targets “so rigid”. The extension of the targets will be one of the topics discussed at this Thursday’s meeting of the National Monetary Council (CMN).

“Brazil does not need to have such a rigid inflation target, as they are trying to impose now, without reaching it. We have to have a goal that we reach; reached that goal, we can reduce and do one more step, go down one more step. That’s why monetary policy has to be mobile, it doesn’t have to be fixed and eternal, it has to be sensitive to the reality of the economy, the aspirations of society,” said Lula in an interview with Rádio Gaúchafrom Porto Alegre.

This Wednesday (28), the Minister of Finance, Fernando Haddad, defended the continuous target model. Currently, the Central Bank (BC) pursues an inflation target established each year, with a tolerance margin of 1.5 percentage points, more or less. In the continuous target system, used in several developed countries, the horizon can be open or obey a period greater than one year, such as 18 or 24 months.

For this year, Brazil’s inflation target is set at 3.25% and, for 2024 and 2025, at 3%, all with the same margin of tolerance. With monthly meetings, the CMN is formed by Haddad; by the Minister of Planning, Simone Tebet; and by the president of BC, Roberto Campos Neto. Generally, decisions take place by consensus, but, in case of disagreement, they are decided by majority vote.

“I hope that Haddad and Simone have all the maturity to make the decision they think they should make”, said Lula.

Criticism of interest

The president again criticized the maintenance of the economy’s basic interest rate, the Selic, at 13.75%. Defined by the Monetary Policy Committee (Copom), the Selic is at its highest level since January 2017. In March last year, the BC began a cycle of monetary tightening, amid rising food, energy and fuels.

The basic rate is the main instrument used by the Central Bank to reach the inflation target defined by the CMN. Its increase causes reflections on prices, since higher interest rates make credit more expensive and stimulate savings, containing heated demand. On the other hand, when the Copom decreases the Selic, the tendency is for credit to become cheaper, with incentives for production and consumption, reducing control over inflation and stimulating economic activity.

In April, influenced by the increase in medicine prices, the Extended National Consumer Price Index (IPCA) was 0.61%, according to the Brazilian Institute of Geography and Statistics (IBGE). The result is lower than the March rate of 0.71%. In 12 months, the indicator accumulates 4.18%.

President Lula reaffirmed that, with low inflation, there is no explanation for the current Selic level. The effects of the monetary tightening are felt in the rise of credit and the slowdown of the economy.

“We don’t have demand inflation”, argued Lula. “There is no sector of the economy, except the financial sector [a favor]everyone [é] against this absurd interest rate, which no one can raise money to invest, at 14%, 15%, 16% interest people will go bankrupt. So, it is necessary to reduce the interest rate so that it becomes compatible, including with inflation. Inflation in 12 months is less than 5%, why does the interest rate have to be at that level? What is the explanation? There is no explanation,” he said.

Lula demanded the intervention of the Senate, which approved the autonomy of the BC and the name of Campos Neto for the presidency of the BC, nominated by former president Jair Bolsonaro. “The Senate, when it approved the autonomy of the Central Bank, it established some criteria for the Central Bank, one of them is to take care of inflation and another is to take care of growth and employment, and it [Campos Neto, até agora, tem cuidado pouco”, criticou o presidente.

“Não é o Lula [que faz as críticas], it’s not the president, it’s the Brazilian people, it’s the unions, industry, commerce, tourism, retail businessmen, including farmers all over Brazil are against this interest rate. So this citizen will have to think and the Senate will have to know how to deal with him”, added the president.

During the interview with Rádio Gaúchathe president highlighted that the new government infrastructure program should allocate R$ 5.7 billion to Rio Grande do Sul in roads and bridges, in addition to R$ 2 billion from the private sector, through public-private partnerships.

Lula recalled that the government asked the governors for a list of priority works and that, in the next ten days, the new investment plan should be announced. The total for the country should reach R$ 23 billion in the area of ​​transport.

“It is not possible for a President of the Republic to govern without being intimately linked to the administration of the state government”, he said. “It’s something that comes from the bottom up, because it’s no use inventing a work that I think is interesting for Rio Grande do Sul, who has to see what the important work is is the state governor, it’s the city mayors , and they are the ones we need to attend to,” he added.

Calendar in RS

This Friday (30th), Lula will be in Rio Grande do Sul, where he will participate in the ceremony to hand over the Minha Casa, Minha Vida residences, in Viamão, and visit the Hospital de Clínicas de Porto Alegre, in the capital of Rio Grande do Sul. A lunch with the state governor, Eduardo Leite is also planned.

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