“The Central Bank of Brazil talks more with the market than with the Finance Ministry,” says Brazilian Minister

The minister says that changing the target is not being considered and advocates for a bipartisan debate on expenditure linkage.

The members of the Central Bank (BC) talk ‘infinitely more with the financial market than with the Treasury,’ says Minister Fernando Haddad. ‘Sometimes, it gives the impression that talking to the Treasury is a sin and talking to the market all day long is not.’ The Finance Minister attributes market volatility to problems ‘that don’t exist’ and dismisses the ‘personalization’ of the debate, but leaves no doubt that the relationship with BC President Roberto Campos Neto was smoother before.

Last week, Haddad had said, in a hearing in the Chamber of Deputies, that the noises about fiscal trajectory worsened because there was a ‘ghost’ influencing people, noises that are ‘sponsored,’ and not real. Without a first and last name, the ‘ghost’ has been associated with the market impact of Campos Neto’s speech in Washington in April. At that time, the BC President suggested that a possible ‘loss of credibility’ in the fiscal anchor would make the ‘monetary side’ more expensive, indicating a smaller interest rate cut in the May Copom.

After saying that he considers the inflation target of 3% ‘very demanding,’ Haddad denies any intention to change it and states that the phrase was said in the context of praising the joint work of the Treasury and BC.

The minister also said that there is no pressure from President Luiz Inácio Lula da Silva for him to address the government more than market agents. He acknowledged that Lula returned to power with a greater ‘anxiety’ to respond to ‘social yearnings,’ but said that this did not prevent him from accepting the fiscal framework.

For the minister, the proposal to unlink the floor of the Pension from the minimum wage is not only an economic issue but also a legal one. ‘I don’t know if it would pass the test of constitutionality,’ he says. ‘These are issues that are either tackled in a bipartisan manner, as State matters, or they will not prosper.’