SAO PAULO (Reuters) – Brazilian President Luiz Inacio Lula da Silva slammed what he sees as the country’s excessively high interest rates, saying that borrowing costs were “the only thing wrong” with Brazil at the moment.
Lula’s remarks came after the central bank voted unanimously earlier this month to accelerate its monetary tightening pace with a 100-basis-point hike, bringing interest rates to 12.25%, and signaled matching moves for the next two meetings.
“The only thing wrong in this country is the interest rate being above 12%. There is no explanation,” Lula told TV Globo late on Sunday after being discharged from hospital following emergency surgeries to treat and prevent bleeding in his head.
“Inflation is around 4%, fully controlled,” the leftist leader added. “The irresponsible ones are those who are hiking interest rates, not the federal government. But we will take care of that.”
Brazil’s currency has recently hit record lows, driven by market concerns over its fiscal outlook after the Lula administration unveiled a spending control package that fell short of expectations to address rising public debt.
Lula defended the measures, which are now awaiting Congress approval.
“We did what was possible and sent it to Congress,” he said. “There is no one as fiscally responsible as me in this country. If I do not control spending, if I spend more than what I have, the poorest will pay for it.”
The central bank’s hawkish move this month cited the market’s negative reception of the fiscal package as a factor worsening inflation dynamics, as inflation expectations drift away from the regulator’s 3% target.
Brazil’s 12-month inflation ended November at 4.87%, above the upper end of the bank’s 1.5% to 4.5% target range, while policymakers have vowed to bring inflation back to 3%.
Lula has been a vocal critic of high interest rates and slammed central bank governor Roberto Campos Neto, an appointee of former right-wing President Jair Bolsonaro, multiple times since taking office for a third non-consecutive term in 2023.
Campos Neto’s term ends this month and he will be replaced by Lula-nominated Gabriel Galipolo.
Next (LON:) year Lula appointees will hold a 7-2 majority on the bank’s nine-member rate-setting committee, up from the current 4-5 minority.
