Brazil Central Bank president says interest should be cut responsibly

In a statement made today (Dec. 12), Brazil's Central Bank President Ilan Goldfajn said the benchmark interest rate, the SELIC, should be reduced responsibly.

“We all want a lower interest rate. This is also what the Central Bank wants. The question is how to get there. To do that, it's key that the reduction in the interest is carried out in a responsible manner, só that it's sustainable in the long run. Otherwise, the trajectory would have to be reversed in the future,” Goldfajn said in a speech during a lunch with bank directors, promoted by the Brazilian Federation of Banks, in São Paulo.

Faced with the country's economic recession and the improvement in inflation, the Central Bank has signaled it could increase the reduction in the SELIC, currently at 13.75% per annum.

Goldfajn said that the Monetary Policy Committee (COPOM) holds regular meetings to evaluate the economy's current and prospective performance and can always adjust the conditions in monetary policy.

“But the assessment on monetary policy must not be mistaken for the debate on the economy's structural interest, which depends on a number of variables, like real factors: productivity, uncertainty degree, guarantees, observance of contracts, etc.” he said. “That is why we've been stressing the need for reforms. They're what's going to pull structural interest down,” he added. Structural rates are connected to how the country's economy is structured as well as its risks.

BC+ Agenda

During the speech, Goldfajn unveiled a work agenda, entitled BC+, founded on four pillars that may contribute to the country's economic recovery. “The first pillar is the sustainable and perennial reduction in the cost of credit in Brazil. In this aspect, moves are aimed at reducing insolvency, lowering the cost of credit for the final client, simplifying reserve requirements, among others,” he said.

The second pillar, he said, is the boosting of the financial system. “Even though our system is famed for its dynamics, there's room for improvement with a view of making our offer of financial products and services even more efficient at competitive prices, with positive externalities for the efficiency of the economy as a whole.”

The third foundation is that of financial citizenship, with measures that promote financial education and strengthen legal and regulatory protection of the population recently included in the system. The fourth and last pillar, according to Goldfajn, is the enhancement of the legal framework governing the activities and duties of the Central Bank, included its autonomy.

Translated by Fabrício Ferreira