(Bloomberg) — Brazil’s interest rates are too high, and responsibility for the growing fiscal problems lies with policymakers at the central bank, President Luiz Inacio Lula da Silva said Sunday night in a TV interview.
Most Read from Bloomberg
“The only thing wrong with this country is the current interest rate, which is above 12%,” Lula said in an interview with Fantastico. “There’s no explanation, inflation is totally under control. The irresponsibility lies with those who raise the interest rates, not the federal government.”
The central bank raised the Selic rate by 100 basis points to 12.25% last week, while also pledging to raise rates to 14.25% in the coming months.
In the statement accompanying the decision — the last chaired by Governor Roberto Campos Neto, who’s set to be replaced by Gabriel Galipolo — policymakers emphasized that the government’s recently announced fiscal package “significantly impacted asset prices and expectations, especially the risk premium, inflation expectations and the exchange rate.”
Lula was discharged from hospital earlier Sunday following emergency brain surgery. He said he will stay in Sao Paulo until Thursday for a new CT scan, and then return to the capital, Brasilia.
“I’m doing well,” said the 79 year old. “I’m feeling like a man protected by God.”
Latin America’s largest economy is closing yet another year of better-than-expected growth, with most analysts saying gross domestic product will expand more than 3% in 2024. Families are consuming more amid record-low unemployment and higher government spending, although the strength of domestic demand is also causing inflation expectations to skyrocket.
Lula’s government is delivering on its pledges to lift living standards for the poor, and recently announced new income tax breaks for families earning less than 5,000 reais ($825) per month.
But that plan dented the impact of an austerity package that calls for cutting 70 billion reais in spending, fueling investor skepticism about Lula’s commitment to shoring up public accounts. Congress must pass the fiscal package before lawmakers head to the holiday break.
“No one in this country, not even the market, has more fiscal responsibility than I do,” Lula said. “I’ve governed this country before, and it’s not the market that has to worry about government spending. It’s the government, because if I spend more than what I have, the poor will pay the most.”