Haddad: “Interest rates above 8.5% are recessive and deflationary”

247 – in interview Granted to journalist Reinaldo Azevedo and lawyer Wilfredo Warda On Monday (14), Finance Minister Fernando Haddad made emphatic statements about the current interest rate policy practiced by the Central Bank, criticizing the delay in cutting interest rates, arguing that interest rates above 8.5% are “recessive and deflationary” for For the economy – given the current inflation of 3.99% in the past 12 months.

In the midst of the interview, Haddad touched on the silicate interest rate, which is Brazil’s base interest rate, which is currently at 13.25%. He pointed out that this rate, in light of the economic conditions, is excessively high and has a negative impact on the country’s economic activity: “One thing that surprised us was the delay in reducing interest rates.” Why was the government bothered by the delay? common sense. He already had reasons to lower interest rates. We were saying, “We can’t fool ourselves with Q1 GDP. Q1 GDP is agricultural [agronegócio]. In April, a very strong slowdown will begin in Brazil. There are lines for me at the farmhouse door that say.”

“When the first quarter GDP came out, people started complimenting me. It had nothing to do with me. I said, ‘Don’t compliment me.'” We have a problem.”, See how it goes for me. On the contrary, I said, “Let’s not fool ourselves.” The slowdown came, but not the interest rate cut. So this period between April, May and July was the moment of greatest tension with the central bank if the August cut was not made. “Come on, I don’t know what we’re going to do,” Haddad added.

The minister stressed the importance of keeping interest rates at neutral levels to ensure a healthy balance between inflation and economic growth: The central bank says the so-called neutral interest rate is around 4.5% and 5%. If inflation is 4%, then 8.5% is neutral. This means that everything above 8.5% is recessive, it’s contraction. So if you cut 0.5 [ponto percentual]calculate: how long will it take to reach a neutral interest rate with a cutoff of 0.5 per meeting, given that there are eight [reuniões] per year. What is neutral interest? Inflation does not go up or down. Cut 0.5 we will live a long shrinkage process.

Haddad expressed his concern about the decline in revenues in the country, noting that the economy has been facing a slowdown since last April, and stressed that reducing the interest rate, albeit a small one, is necessary to avoid serious economic problems. He also highlighted the relationship between interest rate policy and policy decisions: “[sem o corte de 0,5%] Maybe you’ll start getting people voting for home rule [do Banco Central] Saying “Wait a minute, I think we made a mistake”.

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