Brazil President Lula da Silva Attacks Country’s Central Bank

Returning Brazilian President Luiz Inácio Lula da Silva has once again raised his concerns about Brazil's benchmark interest rate level, which stands at 13.75%, claiming it is a major drag on the country’s growth prospects.

Elected on promises of greater national prosperity, Lula has aimed several attacks at the country’s central bank, accusing it of keeping interest rates high for no obvious reason. Analysts note that South America’s largest economy is weakening and is likely to see Lula increase the government’s debt service bill in pursuit of more consumer spending and credit. 

Finance Minister Fernando Haddad, a Lula appointee, is under pressure to revive the economy while also reducing Brazil’s budget deficit. This is an unenviable task as Lula is keen to kickstart his electoral promises by spending public money. Onlookers are concerned about an apparent lack of coordination between the country’s fiscal and economic policies.

Brazil’s economic team is even considering an early review of the country’s inflation targets to defuse tensions between the central bank and President Lula.

Brazil’s central bank last week kept the benchmark interest at a six-year high while signaling that interest rates would remain unchanged for longer than markets expected due to fiscal risks under Lula. The President continues to criticize the country’s benchmark interest rate, arguing vehemently that it must come down even if inflation goes up.