Lula da Silva criticizes high interest rates: 'Brazil's only problem'

Brazil's President Luiz Inacio Lula da Silva has sharply criticized the country's central bank's interest rate strategy, insisting on a reduction of what he considers excessively high rates. During a television broadcast, Lula emphasized that the current cost of credit is 'the only problematic issue' in the country. His criticism follows a decision by the central bank to raise the key interest rate by 100 basis points to 12.25% and to suggest similar steps in upcoming meetings. Lula, who is recovering after emergency surgeries, stated that inflation is at about 4% and thus under control. The 'irresponsible' handling of interest rates is not the fault of the federal government, which will however take countermeasures. The Brazilian Real has recently hit record lows, which is attributed to market concerns over the fiscal outlook of the pair. Lula's proposals for budgetary restrictions are now awaiting congressional approval. The president defends his financial measures by emphasizing that there is no one in Brazil as fiscally responsible as he is. He reaffirmed that excessive spending would mainly affect the poorest. The central bank's aggressive decision, which is also attributed to the negative market reception of the new fiscal package, is seen by Lula as an additional problem for inflation dynamics, as expectations increasingly deviate from the set target of 3%. The twelve-month inflation rate ended in November at 4.87%, which is above the central bank's target range. Lula also repeatedly criticizes the outgoing central bank governor Roberto Campos Neto and looks forward to his appointed successor Gabriel Galipolo. Next year, Lula-nominated members will also have a majority in the nine-member interest rate committee.