For Campos Neto, inflation is not the only reason for high interest rates

Amid questions about the high interest rate policy implemented by the Central Bank (BC), the president of the institution, Roberto Campos Neto, said that the elements that corroborate this increase go beyond inflation. According to him, the definition of the interest rate is a consequence of factors that are not limited to inflation, and that among them is the fact that the government’s gross debt is high, above the international average.

“It is the high debt that makes interest rates high,” said the BC president. Other causes for the high interest rates cited by the economist are the low rate of credit recovery by banks, since default, according to him, is high; the low savings rate; and risk perception. The president of the BC participated, this Tuesday (25), in a public hearing at the Senate Economic Affairs Committee and also stated that technical criteria prevail over political ones in BC decisions.

Inflation

“We look at current inflation; the characteristics of this current inflation; the qualitative aspect of inflation; what can be extracted from current inflation in terms of future expectations; and the country’s ability to grow without generating inflation,” said Campos Neto.

With regard to inflation expectations, the target system plays, according to him, a relevant role by allowing people to readjust prices based on these expectations. Therefore, he added, “we have to be sure that inflation expectations are within the target, anchored”.

Reviews

One of the most emphatic criticisms was made by Senator Cid Gomes (PDT-CE), who even used a blackboard to present a comparison between inflation and interest rates charged in the United States and Brazil.

“In 2022, US inflation was at 6.5% while the interest rate was at 4.5%. In Brazil inflation was at 5.8% while the interest rate was at 13.75%. There is no reason for this difference”, said the senator.

Gomes added that half of the country’s debt is linked to the basic interest rate, the Selic. “If Brazil had adopted the same interest rate as the US, it would have saved R$510 billion. This is money that unfortunately falls into the account of those who already have it. In this case, the rentier. This is playing Robin Hood in reverse, taking money from the poor to concentrate it in the hands of the rich,” he argued.

In order to show what this amount represents, which, according to him, could be saved, Gomes recalled that the Bolsa Família program has a budget of R$ 170 billion. “It would triple the current value. It would be enough to build 3.6 million popular housing per year, which, in two years, would solve the country’s housing deficit problem, “he added.

“It would also be enough to build 134,000 schools a year. This would universalize, in 3 years, the necessary infrastructure for all full-time enrollments. To give you an idea, if you increase the minimum wage by 10%, the impact for the government would be around R$ 28 billion. In a simple calculation, the total amount would raise the minimum wage by 180%, reaching R$ 4,000,” he added.

Senator Omar Aziz (PSD-AM) stated that, unfortunately, those who pay for the large amount of public money spent on interest “are the poor”. He then asked the BC president if he agrees with that statement.

Campos Neto said he agreed, then amended: “High interest rates make the cost for the entire economy, including the poor. It falls on employment too”, he added.