2023-07-29 23:40:32
© Reuters. Minister of Finance, Fernando Haddad 02/07/2023 REUTERS/Adriano Machado
SAO PAULO (Reuters) – Finance Minister Fernando Haddad said on Saturday that the Central Bank has “considerable room” to cut the Selic rate, stating that the cycle of monetary easing that will likely begin next week will be fundamental for economic agents to intensify their investments in Brazil.
“The space (for monetary easing) that exists is quite considerable,” said Haddad in an interview with GGN TV.
“It is a situation that effectively gives us conditions to harmonize economic policy with fiscal policy in a very interesting way to open a cycle of sustainable growth in the country”, added the minister, citing signs of reduction in inflation and an increase in the credit rating of the Brazil by risk rating agencies as an argument in favor of beginning to ease interest rates.
Haddad assessed that any movement of the Selic by the BC in August, be it a cut of 0.25 or 0.50 percentage points, will probably not have a great impact on the economy immediately, since interest rates, currently at 13.75%, will continue in very restrictive threshold.
However, “this sign is very important for economic agents to start repositioning themselves in relation to the internal market”, said Haddad, predicting an increase in investments in the country.
The minister, who has been suggesting he is in favor of a more intense cut in the Selic rate next week, of 0.50 percentage points, said that “it would be a big surprise” if the BC opted to leave interest rates unchanged at the next meeting of the Committee on Monetary policy.
Most economists polled in a Reuters poll expect the BC to cut basic interest rates by 0.25 percentage points when it meets on August 1st and 2nd. Financial market operators, on the other hand, were more divided, embedding a probability of around 53% of a half-point reduction, with a 47% chance of a milder adjustment.
Still commenting on the government’s relationship with the monetary authority, Haddad said in the interview that President Luiz Inácio Lula da Silva’s appointment of the new BC directors will bring “new visions” to the Copom, making the discussions more plural. “The debate will air a lot, we will bring new perspectives”, he stated.
Gabriel Galípolo and Ailton Aquino, appointed by the government to the BC’s board, took over the chairs of Monetary Policy and Supervision, respectively, this month.
TAX REFORM
Amid concerns about the possible inclusion of too many exceptions in the text of the tax reform, currently being discussed in the Federal Senate, Haddad said this Saturday that his portfolio intends to release data on the costs of these benefits in the next week or the following week. According to him, the accounts will show how much each benefit would require in terms of the need to raise the standard rate to be charged under the new tax system.
“What is the objective? It is not to punish anyone, it is to give clarity to Congress that, if it benefits a sector, it has to be very well grounded for that, because everyone will pay for it”, said the minister.
He assessed that the most appropriate path to be followed by the Senate now would be “just to file” the text of the reform that came from the Chamber, “so that it becomes leaner and, if you have to go back to the Chamber, go back to score the goal , close the matter and take the biggest economic step that Brazil could take at this point”.
(By Luana Maria Benedito)
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