Despite the maintenance of the base interest rate, the Selic, at 15% per year, one of the highest levels in almost two decades, by the Central Bank (BC), the Minister of Institutional Relations, Gleisi Hoffmann, adopted a less confrontational tone with her allies, such as the president of the BC, Gabriel Galípolo.
The Monetary Policy Committee (Copom) decided to maintain the Selic at 15% for the fourth consecutive meeting, justifying that the current level is still necessary to ensure the convergence of inflation towards the target and contain global economic uncertainty.
The decision was made against a backdrop of subdued inflation and slowing economic activity, fueling expectations about the future of the high interest cycle in the first quarter of next year.
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Traditionally critical of tighter monetary policy, Gleisi has publicly toned down his statements on the issue to government allies.
In previous months, Gleisi has harshly criticized the high interest rate policy and the actions of the Central Bank, saying that the “stratospheric” rate of 15% penalizes the economy and the productive sector.
The most pronounced criticism took place during the management of the former President of British Columbia, Roberto Campos Neto, appointed by the former President of the Republic Jair Bolsonaro (PL).
At the last Copom meeting regarding the management of Campos Neto, in December last year, interest rates reached 12.25% per annum with two further increases contracted at subsequent meetings.
At the time, Gleisi said the then-president of British Columbia was responsible for the “criminal sabotage of the country’s economy during the first two years of the Lula government.”
She also said that Campos Neto did not deal with speculation on exchange rates and stifled the country’s economy and credit. “It is already too late in Campos Neto. I hope that from now on your tax terrorism will also be overcome,” he said in a message on social networks.
British Columbia’s decision to increase the base interest rate to 12.25% is irresponsible, foolish and disastrous for the country. This makes no sense and would not be effective in preventing rising inflation, which is not demand-driven. Not even to improve the budgetary situation, quite the contrary. This 1 additional point will be…
–Gleisi Hoffmann (@gleisi) December 11, 2024
gentle tone
However, even when the current composition of the BC unanimously decided to keep interest rates at 15%, Gleisi only took a position at the time of publication of this article, a few days after the Copom decision.
After the first decision of the committee under Galípolo’s leadership, in January 2025, which increased by 1 percentage point, bringing the Selic rate to 13.25% per year, Gleisi estimated that the increase had already been contracted by the previous administration and that it had not restored many alternatives to the new presidency.
At the next meeting, in March, there was a further increase, to 14.25% per year. Gleisi did not take a position on an increase. A third increase took place in May, leaving the Selic at 14.75% per year, but the minister did not speak on this subject either. In June, when interest rates reached 15% per year, silence was also felt from Lula’s ally.
The minister only returned to office in November, after maintaining the rate for the third consecutive meeting.
“Copom’s decision to maintain the Selic rate at 15% for the third time is detrimental to productive investments, access to credit, job creation and the balance of public accounts. It harms Brazil. No economy in the world can live with real interest rates of 10%. Nothing justifies a decision so disconnected from reality, economic indicators and the needs of the country,” he declared.
Understand what Copom is
- The Monetary Policy Committee is the body of the Central Bank responsible for defining the basic interest rate of the economy, the Selic;
- The group uses Selic to control inflation, when it rises too much, interest rates rise; when it is low, it is possible to reduce it;
- The Copom is formed by the president of the Central Bank and the directors of the institution, specialized in areas such as economic policy and regulation;
- The board meets every 45 days to analyze economic data, such as inflation, exchange rate, activity and international scenario, before voting on the rate.
Remember the publications of Gleisi under the direction of Campos Neto
In June, when the Selic was at 10.5% per year, Gleisi declared that “there is no technical, economic or even moral justification for maintaining a base interest rate at 10.5%.”
There is no technical, economic or even moral justification for keeping the base interest rate at 10.5%, when even the most exaggerated speculation does not endanger the inflation target range. And it will not be by playing into the hands of the market and speculators that BC’s management will do it…
–Gleisi Hoffmann (@gleisi) June 19, 2024
In July, while the interest rate was maintained, the minister declared that “insisting on the second highest interest rate on the planet is an attack on the Brazilian people.” She said the charges were considered criminal.
In another message, he accused Campos Neto of sabotaging the government.
Bolsonarist Campos Neto is about to end his disastrous period in British Columbia by imposing the highest interest rate on the planet in Brazil. There is no economic, technical or other basis to explain this madness. His political intention to sabotage the government of…
–Gleisi Hoffmann (@gleisi) August 1, 2024
After Selic reached 11.25% per year, the president of the Workers’ Party at the time estimated that Copom was “sabotaging the country’s economy”.
The Copom note to “explain” the new increase in interest rates is pure market terrorism. He even forecasts a Selic rate of 14.5% if there are no “structural changes” in the budget. It is indecent to use this type of blackmail, or even the threat of a surge in the exchange rate, to try to prevent…
–Gleisi Hoffmann (@gleisi) November 7, 2024
Lula’s recommendations
The next composition of Central Bank directors must be entirely appointed by President Luiz Inácio Lula da Silva (PT).
Indeed, the directors Renato Dias de Brito Gomes, of the Organization of the Financial System, and Diogo Abry Guillen, of Economic Policy, appointed by Bolsonaro, will leave their functions on December 31, while the mandates of the BC last two years. Thus, the British Columbia board will be entirely appointed by Lula.
Check out the current BC members appointed by the President:
Gabriel Galípolo – president of the Central Bank; Ailton Aquino – Director of Inspection; Gilneu Vivan – director of Regulation; Izabela Moreira Correa – director of citizenship and driving monitoring; Nilton David – director of monetary policy; Paulo Picchetti – director of international affairs and enterprise risk management; Rodrigo Alves Teixeira – Director of Administration.
The financial market expects the BC to start reducing interest rates at the beginning of 2026, when the committee will already be complete, as the year is expected to start with two fewer directors at Copom.
It turns out that in addition to Lula’s nomination, which has not yet taken place, the names must go through a hearing at the Economic Affairs Commission (CAE) of the Federal Senate, which is not expected to take place in the first weeks of the year, given that the Attorney General of the Union, Jorge Messias, is still waiting for the hearing on the calendar.
Messias was appointed to the post of Minister of the Federal Court (STF).
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