Lula sharpens crisis with central bank while traders see rate hike

Lula described the central bank’s stance on rates as a “shame” and urged companies to complain about borrowing costs.

“there is no justification” so that the Selic reference rate is at its current level of 13.75%, he said Monday during the swearing-in ceremony for Aloizio Mercadante as executive director of the state development bank, BNDES, in Rio de Janeiro.

The markets are increasingly concerned about his comments. Traders, who in October expected rate cuts for March, are now betting on an additional quarter of a percentage point hike for May.

A rate cut is estimated only at the end of the year. Most economists surveyed by the central bank now forecast the start of the easing cycle until November.

The 77-year-old leftist leader has clashed for weeks with the central bank over keeping interest rates high to curb rising consumer prices, a strategy that Lula says is hampering growth and hurting those most in need. Brazil.

Policy makers kept rates unchanged last week, citing concerns that rising inflation expectations are being “putting away” of your objectives in a tax scenario “particularly uncertain”.

Lula said his criticism did not refer to whether the bank was independent or not, but to the fact that the institution continues to keep rates high. In Brazil, “the problem is that there is a culture of living with high interest rates and that does not mix well with the needs and investment”.

The current levels of the Selic rate make it “impossible” boost growth, Lula said last month during a television interview. He added that he considered the bank’s autonomy law to be a “nuisance” and suggested an inflation target above 4.5%.

Brazil’s central bank will publish the minutes of its January 31 and February 1 rate meeting on Tuesday.