Brazil’s Lula hints at inflation target change, calls high interest rates ‘inexplicable’

2:11 pm Thursday, April 06th, 2023

SAO PAULO (Reuters) -Brazilian President Luiz Inacio Lula da Silva on Thursday hinted that the government might change inflation targets, calling high lending costs “inexplicable” as he continued his push for lower interest rates.

“If the inflation target is wrong, change the target,” the leftist leader said a meeting with journalists broadcast by TV channel GloboNews.

The target is set by the National Monetary Council, comprising central bank Governor Roberto Campos Neto and the ministers of finance and planning.

However, Lula said he was not looking to pick a fight with the appointee of former President Jair Bolsonaro whom he had been criticizing for months while arguing that current rates hinder economic growth.

Earlier this year, speculation emerged of a potential government move to boost inflation targets in a bid to lower lending costs, but that did not materialize.

Brazil has an inflation target of 3.25% for 2023, which will be lowered to 3% in 2024, but consumer prices reached 5.6% in the 12 months through February. Benchmark interest rates stand at a six-year high of 13.75%.

GloboNews reported that Lula’s spokesman Paulo Pimenta said the president was talking about an “hypothetical scenario” when referring to inflation targets, but that the topic would be discussed once he returns from a trip to China later this month.

At the same meeting, Lula also said his government would eventually alter the fuel pricing policy of state-run oil giant Petróleo Brasileiro S.A., known as Petrobras, but that the matter was not being discussed at the moment.

He noted any change would be “very judicious.”

On Wednesday, Petrobras shares took a dive after Mines and Energy Minister Alexandre Silveira said the government would scrap the company’s policy of tracking international prices, but they pared losses when the company said there was still no formal proposal from the Lula administration.

(Reporting by Eduardo Simoes and Pedro Fonseca; Writing by Gabriel Araujo; Editing by Steven Grattan and Richard Chang)