SAO PAULO (Reuters) -Brazilian Finance Minister Fernando Haddad said on Wednesday that discussing the interest rate level, currently at a six-year high of 13.75%, is more important than debating inflation targets, mirroring the president’s dissatisfaction with the country’s borrowing costs.
Speaking at an event hosted by BTG Pactual, he said that with the current level of real interest rates, discounting inflation, it was “difficult to navigate.”
His remarks come amid a feud between President Luiz Inacio Lula da Silva and central bank chief Roberto Campos Neto, with the leftist leader saying the current rate levels hinder economic growth in the country and that inflation targets were too low.
Haddad had already said the National Monetary Council – the government’s top economic policy body – would not discuss changing inflation targets at its eagerly awaited monthly meeting on Thursday.
The minister said the economic situation today was better than a month ago, but acknowledged that expectations are tainted by what he characterized as “noise.”
Earlier this month, the central bank drew attention to the deterioration of inflation expectations due to fiscal concerns under Lula when it kept the country’s benchmark interest rate unchanged and signaled that any monetary easing, given the conditions, would take longer to begin.
“I regret if the monetary authority is swayed by noise,” Haddad said. “That’s not the role; you have to go by the fundamentals. You have to see what’s really happening. You can’t make decisions based on the momentary fantasy of stress that may happen.”
The minister on Wednesday also stressed that the country’s new fiscal framework should be presented by the new government in March, compared to the previous April deadline.
He added that tax reform, another of his priorities, is important not because of its immediate effects, but to dissipate legal tax risks in Brazil.
(Reporting by Marcela Ayres in Brasilia; Editing by Toby Chopra and Jonathan Oatis)
