People burn interest in public square, but Lula can help put out fire – 03/21/2023 – Vinicius Torres Freire

Roberto Campos Neto, president of the Central Bank, is pop. Protesters set fire to a doll with the face of “that citizen” during a protest against interest rates, this Tuesday (21), on Avenida Paulista.

On social networks, petistas made the skull of Campos Neto. In the campaign, they resorted to slogans that they picked up from the mouths of participants in a BNDES seminar. Luiz Inácio Lula da Silva kicked BC more.

However, since the beginning of February “the market” says “we’re together”. It’s sarcasm, but not too much. The one-year interest rate dropped to 12.78%. In November, it was 14.6%, at the height of the stress caused by “Lula Day” and other speeches by the president-elect. The real interest rate (ex ante) dropped from 8.8%, at the worst of November, to 6.8%. Rates beyond two years remain horrible.

Even so, only by a miracle should the Central Bank remove the Selic from the current 13.75% this Wednesday (22nd), which no one in the market expected. Yes, a sign is expected that the tightening will begin to ease in May, at the next meeting of the Central Bank’s Monetary Policy Committee. Lula and his government can lend a hand.

If it complies with the rule of its order, the BC will pay more attention to its usual affairs, although there has been something new since the last Copom meeting (February).

Inflation expectations more or less stopped rising, but at the top they stayed above targets. The real has devalued since February. It will be difficult for the BC projection machine to spit out very favorable inflation projections — perhaps an IPCA will come out on target in 2024, if that.

Anyway, Lula still hasn’t announced the “new fiscal framework” (limiting government spending and debt), which is under friendly fire from big PT members. The fiscal plan revelation tea was left for next month. So maybe the year starts in April.

Yes, there are more signs of a slowdown in the Brazilian economy, such as employment. Credit impulse (a measure of growth in total new bank lending) has been negative since October and down, although the most recent data is for January. The capital markets (where companies raise money) took a nasty hitch in February. Interest rates for families and companies are horrible.

There is a global financial crisis boiling low, with the risk of new spills at any moment and with a negative effect on credit and growth, abroad and here. Commodity prices fell, in part because of the Euro-American banking mess, which is big. Credit Suisse is gone — not a stool or stool for cryptocurrencies.

These days, stress indicators have gone down, but the patient (world finance) is doped with massive offers of money from central banks. Or the tranquilizers of the imperturbable Janet Yellen, secretary of the United States Treasury. On Tuesday, Yellen said she will do what she can to prevent further bankruptcy or to reassure depositors, insuring everyone if another bank fails.

BC do Brasil may come up with some information that no one is looking at. Perhaps a literary soul will invent a speech there to change the theoretically predictable orientation of monetary policy. It would be a surprise.

In any case, a more favorable environment for a fall in the Selic rate can be created. That is, a faster fall, since in May the economy may show acute signs of shortness of breath, due to the tightening.

Giving birth to that fiscal plan and stopping talking about inflation targeting (at least for now) would help. Lula would then be able to hop on the tram that she missed in November, which was heading towards lowering interest rates. He didn’t go there because of the counterproductive speech that started in November. And keeps going.

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