Productive sector calls for balance in interest rates
The minister’s statement took place during a session on the Senate floor in which the relationship between interest rates, inflation and growth was discussed. Also participating in the event were the Minister of Planning, Simone Tebet, and the President of the Central Bank, Roberto Campos Neto, as well as representatives of the productive sector.
One of the representatives of the productive sector at the event, the president of the National Confederation of Industry (CNI), Robson Braga de Andrade, stated that the industry has been suffering from low demand, unemployment and idle factories. He criticized the current level of interest rates.
“As a representative of the CNI in recent years, every time there is a Copom meeting, I prepare myself for a note of displeasure that the increase was excessive or the reduction was too low, when we see the Selic at 13.75%, real interest of 8.1%, the industry is taking credit at 30% in the market, last year we were taking it at 20% and now it is at 30%, there is no business activity that has the capacity to face such a situation.”
Robson Braga de Andrade asked that a balance level be found for the interest rate, because, in the current scenario, the productive sector is being harmed. “We need to measure these interest rates so that they are interest rates that, of course, meet the inflation target issues, but that also do not harm growth and economic development”.
The inflation target for this year is 3.25%, but there is a tolerance interval of 1.5 percentage points, with a minimum of 1.75% and a maximum of 4.75%. Inflation measured by the Extended Consumer Price Index (IPCA) in the last 12 months was 4.65%, according to the IBGE. Therefore, below the ceiling, even if the indicator is not coinciding with the target.
Responsible for defining the economy’s basic interest rate, the Selic, the Central Bank has been the target of criticism from the Lula government. With the aim of making inflation converge to the target, Bacen has kept the Selic at 13.75% since August last year. The Executive is pressing for a drop in interest rates on the grounds that a rigid monetary policy reduces access to credit and economic growth.
Haddad said that several sectors of the economy have been “drastically affected” by the current level of interest rates. He defended that the monetary policy (conducted by Bacen) and the fiscal policy (conducted by the Executive) be aligned so that the country can grow in a sustainable way.
“I don’t see fiscal policy, monetary policy and prudential policy as separate from each other. They are part of the same gear. If the economy continues to slow down for reasons related to monetary policy, we will have fiscal problems and revenue will be impacted” .
During his speech, Campos Neto admitted that the Brazilian real interest rate (Selic rate minus inflation) is high, but he stressed that it is below the historical average and that “no one wants to slow down credit”, but that this is part of the remedy adopted by the Bacen to control inflation.
The president of the Central Bank also highlighted that the Monetary Policy Committee (Copom) – responsible for setting the Selic rate – seeks to measure the adjustments not only thinking about controlling inflation, but also trying to “soften” the impacts of interest rates on economic growth.
Campos Neto pointed out that inflation has been falling. However, he stated that some core prices remain high and that readjusting the Selic rate downwards could have the opposite effect to what is expected both on the supply of credit and on economic growth. “We had several places in the world where interest rates fell without credibility and, in fact, credit did not fall. Exchanging inflation for growth has resulted in less growth and this is also documented”.
According to the president of Bacen, the reduction of the Selic, by itself, is not enough for the economy to grow again. For him, structural reforms, such as the one that deals with the tax system, are fundamental for the drop in interest rates. “When we look at the history of our interest rate, every time we carry out structural reform, the interest rate was able to fall. When the spending ceiling was announced, the long interest rate fell from 17% to 10%” .
Text of the fiscal framework will undergo changes, points out rapporteur
By Brasil 61
