BC could be ‘a little more generous’ after measures announced by the government, says Haddad

Minister Fernando Haddad (Finance) said this Monday (6) that the Central Bank’s warnings about the fiscal situation refer, above all, to the legacy left by the Jair Bolsonaro government (PL) for the current administration, but that the authority Monetary policy could have been “a little more generous” after the measures announced by the PT administration to improve public accounts.

Last Wednesday (1st), the Copom (Monetary Policy Committee) maintained the basic interest rate at 13.75% per year for the fourth consecutive time, in the first meeting since President Luiz Inácio Lula da Silva (PT) He took office.

In the statement, the BC collegiate issued warnings about fiscal uncertainties and the worsening of inflation expectations, which are moving away from the target in longer terms, and signaled that it should leave interest rates at the current level for longer.

The messages provoked an increase of tension in the monetary authority’s relationship with the government, generating an escalation in the criticism fired by President Lula against the BC.

“What the Central Bank said, I believe, makes more reference to the legacy of the previous government, than to the measures that are being taken by this government”, stated Haddad.

“There really is a fiscal situation that inspires care, but this is an inheritance that we have to manage. In 30 days of government, we are not going to resolve a liability of R$ 300 billion that was inherited from the previous government.”

“But our commitment is with the balance of accounts. I announced on the 12th that we are going to pursue better results. In this regard, I think that the note could be a little more generous with the measures that we have already taken”, he added.

On January 12, Haddad announced a broad package of measures with the promise of delivering a fiscal improvement of R$ 242.7 billion in public accounts this year.

The economic team is betting on the reversal of exemptions and on extraordinary measures to collect more, in the face of pressure from the financial market to reduce the R$ 231.55 billion shortfall, aggravated by the PEC (proposed amendment to the Constitution) that authorized the increase in expenses in 2023

The BC collegiate highlighted in the communiqué that “the situation, particularly uncertain in the fiscal scope and with inflation expectations moving away from the target in longer horizons, demands greater attention in the conduction of the monetary policy”.

The committee also said that it considers that this “conjuncture raises the cost of the necessary disinflation to reach the inflation targets” established by the CMN (National Monetary Council).

The message was received by the president and some ministers as a betrayal by Campos Neto of the government’s trust, which was counting on the body to participate in a joint effort for Brazil to overcome the current economic problems, as shown by Mônica Bergamo’s column.

This Monday, Lula reiterated his criticism of the Central Bank’s actions and said that the country’s current basic interest rate is “a disgrace”.

“There is no justification for the interest rate to be at 13.50% [o patamar da Selic está, na verdade, em 13,75%]. Just look at the letter from the Copom for us to know that this interest rate increase is shameful,” said Lula.

The demonstration took place during the inauguration of the new president of the BNDES, Aloizio Mercadante, in Rio de Janeiro.