Get 40% Off
☕ Buy the dip? After losing 17%, Starbucks sees an estimated 20% upside. See the top Undervalued stocks!Unlock list

Brazil finance minister backs Lula on rates but is focused on economy -source

Published 02/09/2023, 08:24 AM
Updated 02/09/2023, 08:31 AM
© Reuters. FILE PHOTO: Brazil's Finance Minister Fernando Haddad speaks during a ceremony, during a meeting of the managers of Caixa Economica Federal public bank's service network in Brasilia, Brazil February 7, 2023. REUTERS/Adriano Machado/File Photo

By Marcela Ayres and Ricardo Brito

BRASILIA (Reuters) - Brazil's Finance Minister Fernando Haddad agrees with President Luiz Inacio Lula da Silva's view that interest rates need to drop, but is focussed on the new government's agenda rather than taking on the central bank, an Economy Ministry source said.

Leftist Lula again raised his concerns about Brazil's benchmark interest rate level, which stands at 13.75%, during a closed political meeting on Wednesday with Haddad, Luciano Bivar, a federal deputy who was present, told Reuters.

But Haddad had focused instead on the new Brazilian government's economic agenda, highlighting a new fiscal framework to be presented in April and tax reforms, Bivar said.

"The President showed discomfort over the central bank's actions, but Haddad preferred to focus on the government's agenda with Congress, the creation of the fiscal framework and tax reform," Bivar said.

Representatives for Lula and Haddad had no immediate comment on their discussions during the political meeting.

Haddad's stance of keeping out of the debate stirred by Lula's attacks on the central bank does not mean he disagrees with the leftist president's views, the Economy Ministry source told Reuters, speaking on condition of anonymity.

Lula has repeatedly criticized Brazil's benchmark interest rate level as a major drag on the country's economic growth and has indicated that it should aim for higher inflation.

Haddad's economic policy secretary has previously said the issue is not being discussed in the ministry.

When they kept Brazil's benchmark interest at a six-year high last week, central bank policymakers signalled that interest rates could remain unchanged for longer than markets expected due to fiscal risks under Lula.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

But when the minutes from the rate-setting meeting later mentioned the government's fiscal plans presented by Haddad as possibly mitigating risks, he went public to say that the bank's tone was now "more friendly".

A second official at the economy ministry said Lula's criticisms of the central bank are not a topic of internal discussion, despite concerns that they generate market uncertainty and hinder efforts to lower interest rates.

When Haddad met with senators from Lula's Workers Party (PT) on Tuesday, the interest rate debate was not discussed, two sources who asked not to be named told Reuters.

One said that the government's allies in Congress should push ahead with requests for central bank governor Roberto Campos Neto to appear before Congressional committee hearings.

But the sources added that there was no government plan to try to remove Campos Neto.

The central bank had no immediate comment.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.