The Central Bank's decision is not economic, it's political and partisan.

By Jeferson Miola, for 247 

The Central Bank's decision to keep interest rates at 13,75% and even signal the "maintenance of the basic interest rate for a prolonged period" has no technical or economic basis; it is purely political and partisan in nature.

There is no technical or economic justification for Brazil's basic interest rate to remain at the highest level in the world, at 8% real gain, even after discounting inflation. In fact, there is a huge consensus to the contrary among world-renowned economists.

Nobel Peace Prize laureate Joseph Stiglitz, for example, describes maintaining real interest rates at 8% as "shocking," which amounts to "a death sentence" for any economy.

According to economist Jeffrey Sachs, "Brazil needs an increase in the investment rate," not the interest rate. He believes that interest rates are high "due to politics," not the country's fiscal reality.

This choice by the Central Bank “is not based on fiscal fundamentals,” he argues. Sachs calculates that “if the rate were 5% lower today, the deficit would be cut by 3%.”

The Central Bank's claims to justify continuing its bullish policy are weak and unsustainable. They reveal the current board's failure to conduct monetary policy, which urgently needs to be changed.

The Central Bank's statement [March 22] acknowledges its incompetence, for the third consecutive year, in controlling inflation, which "remains above the range compatible with meeting the inflation target." This means that high interest rates have failed to contain inflation and, worse, have become a deadly poison for the economy, as economist Stiglitz warns.

In reality, besides failing to control inflation within the target, the practice of high interest rates also creates a vicious cycle of permanent fiscal imbalance, since the Central Bank creates expenses [without legislative authorization and without the agreement of the Executive Branch] and also forces the Treasury to divert public money from investments and social policies to pay for the servicing of the public debt. As a result, the public debt increases instead of decreasing.

The Central Bank also claims that "monetary policy in core economies continues to advance on a contractionary trajectory." This would justify, in the opinion of the geniuses of rent-seeking, maintaining the current rate. This, however, is pure euphemism.

It is true that the Central Banks of the US and Europe have raised interest rates in the recent period, but with a fundamental difference compared to the Central Bank of Brazil.

While real interest rates remain negative in the world's major economies, even with recent rate hikes by most central banks, Brazil has the highest real interest rate in the world – 8% per year.

The president of the Central Bank, Roberto Campos Neto, a supporter of Bolsonaro, has lost the legal conditions to remain in office. He and the entire board of directors of the institution have demonstrated "proven and recurring insufficient performance to achieve the objectives of the Central Bank of Brazil" – item IV of article 5 of Complementary Law 179/2021, on the autonomy of the Central Bank.

Campos Neto is a provocateur and saboteur who, in the economic field, follows the terrorist playbook of the far-right. He bets on recession and unemployment to lead the country to chaos and destabilize the Lula government. The high interest rate policy, from this perspective, means... continuation of January 8th via financial terrorism.

Under the ultraliberal and Bolsonaro-aligned management of Campos Neto, the Central Bank – “autonomous” in relation to popular sovereignty, but ideologically linked to the ultraliberal far-right – is a factor of plundering the country and, at the same time, a weapon of sabotage and political struggle to undermine the Lula government..

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