There is no magic in public accounts, says Campos Neto – 04/25/2023 – Market

The president of the Central Bank, Roberto Campos Neto, said this Tuesday (25th), in a public hearing at the CAE (Economic Affairs Commission) of the Federal Senate, that the country’s sustainable growth, with inflation control, does not depend on ” magic” nor a “silver bullet”, but discipline of public accounts.

“It is very important for us to understand that there is no magic in the fiscal, unfortunately there is no silver bullet. If we do not have the accounts up to date, if we do not have a perspective, we cannot improve”, he said.

In defense of his argument, Campos Neto cited as an example the case of the United Kingdom, which culminated in the resignation of Prime Minister Liz Truss. The trigger for the departure of Boris Johnson’s successor was the launch of an economic program to cut taxes and increase public spending.

“It was a problem that generated an immediate market reaction, which the British Central Bank had to step in to help and which fell the Prime Minister and the Minister of Economy in the space of a week”, he said.

“Returning to the example of England, unfortunately there is no silver bullet. It is very difficult today for a country to follow the system of targets that we follow without having a regime of fiscal discipline”, he added. “We understand that this is the way to go.”

Campos Neto was invited by parliamentarians to appear at the National Congress to explain the basic interest rate (Selic) – fixed since August 2022 at 13.75% per year.

The invitation to the president of the BC came in reaction to the direct and recurring criticisms of President Luiz Inácio Lula da Silva (PT) and government members of the high level of interest rates in the country amid a scenario of slowing economic activity and rising defaults –Payments overdue for more than 90 days.

To the parliamentarians, Campos Neto once again said that the fiscal framework, proposed by the Lula government, was a “movement in the right direction”, which removes the risk of a significant deterioration in the path of the public debt.

However, the head of the monetary authority stressed once again that there is no automatic relationship with the interest rate cut.

“Let’s remember that it has no mechanical relationship [com o processo de redução de juros]what we need is for the expectations channel or the projections channel, together with this credibility channel, to act in a way that allows the Central Bank to eventually lower interest rates”, he said.

The president of the Central Bank highlighted in his presentation that the approval of the spending ceiling and structural reforms, such as the Social Security, generated a better fiscal perspective, contributing to the drop in interest rates in the past.