Thursday, September 28, 2023
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Brazil's Haddad sees country ready for rate cut

SAO PAULO (Reuters) – Brazil’s Finance Minister Fernando Haddad said on Friday that the country was about to enter a cycle of downward interest rates, noting that inflation was “steadier.”

“We’re about to … have a down cycle in interest rates. Flatter inflation,” Haddad said in an interview with local broadcaster GloboNews. “Long-term interest rates are falling. GDP is being revised upward.”

Haddad’s comments came after his boss, leftist President Luiz Inácio Lula da Silva (Luiz Inacio Lula da Silva) has repeatedly criticized the central bank’s resistance to cutting borrowing costs.

Monetary authorities have kept Brazil’s benchmark interest rate at 10.25% since September. Brazil’s Central Bank Governor Roberto Campos Neto has ruled out an imminent rate cut.

Inflation fell to a two-and-a-half-year low in early May, data from Brazil’s statistics institute showed on Thursday, adding to pressure on the central bank to start cutting interest rates.

Even with lower interest rates, the government is concerned that there may be a lag between rate cuts and a rebound in consumption, Haddad added, noting that the government unveiled measures on Thursday to boost local industries, especially the auto sector.

In the interview, Haddad again called for “sustained inflation targeting” instead of Lula’s criticism that the current fixed-calendar-year model is too low. Another inflation-focused system is “gaining support,” Haddad said. and 2024 and 2025 are 3%, plus or minus 1.5 percentage points.

Haddad joins Central Bank’s Campos Neto and Lula’s planning ministers as members of the National Monetary Council, which will meet at its June meeting Discuss Brazil’s inflation target.

The minister said inflation could reach 5.5% this year but “never” exceed it as it did for most of last year 10%.



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