Brazil’s Central Bank decided on Wednesday to lower its benchmark interest rate, SELIC, by 50 basis points to 13.25%. It is the first change made in the last nine months and the first decrease in almost three years.

The Bank’s decision arrives amid criticisms from Brazil President  Luiz Inacio Lula Da Silva levied at the head of the financial entity — Roberto Campos Neto, a supporter of former President Jair Bolsonaro. Lula accused Campos Neto of defending economic interests outside of Brazil by keeping up high interest rates despite inflation slowing down. 

“Without jeaopardizing the fundamental objective of guaranteeing price stability, this decision also implies softening the fluctuations in economic activity as well as promoting employment,” said Monetary Policy Committee (Copom by its Portuguese acronym) said in a communiqué.

Copom expressed that it had originally evaluated the alternative of reducing the SELIC to 13.5% but opted to lower it further due to the improved inflation panorama. It highlighted that “if the predicted scenario is confirmed, Committee members unanimously foresee an identical reduction in the next meetings and consider that this is the appropriate rhythm to maintain a contractionary monetary policy, which is necessary for the disinflation process.”

“That guy in the Central Bank doesn’t understand the people and doesn’t understand Brazil,” said Lula, referring to Campos Neto in a press conference with foreign correspondents in Brasilia. “Who he’s serving, I don’t know. Not Brazil’s interests, no. Let’s hope he lowers the interest rates.”

Campos Neto was appointed by Bolsonaro and his mandate is until 2024 — the Central Bank is autonomous by law — but some in the ruling administration have called for his removal, accusing him of cooling the economy in order to sabotage Lula’s economic success.

Lula’s dispute with Campos Neto has been fueled by the Central Bank maintaining a 13.75% interest rate — from September 2022 until now — in order to comply with the entity’s 2023 objective of 3.25% inflation.

Brazil has an interannual rate of 3.26% and suffered an 0.08% deflation in June. The country’s real interest rates are considered the highest in the world in relation to its inflation rate. 

—Télam