Sources: Brazil’s Bolsonaro vexed by central bank autonomy

Aug 20, 2021, 12:13 PM | Updated: Aug 21, 2021, 6:19 am

BRASILIA, Brazil (AP) — Brazilian President Jair Bolsonaro has begun expressing irritation at the central bank’s newfound autonomy as surging inflation presents a threat to his 2022 reelection prospects, government officials told The Associated Press.

On Thursday, during a flight home from Mato Grosso state, Bolsonaro said he regretted signing the bill into law earlier this year that granted the bank autonomy, a high-level official aboard told AP. Separately, Bolsonaro on several recent occasions has expressed discomfort with the autonomy and said he would like to interfere in monetary policy, a minister who has heard such complaints himself told AP. Both spoke on condition of anonymity because they weren’t authorized to speak publicly.

The law passed in February sought to protect the bank from political meddling and burnish Brazil’s economic credibility among investors. Under the law’s terms, the president still nominates the central bank chief, but cannot fire him for disagreements about monetary policy.

Bolsonaro in 2018 provided assurances that he would remain hands-off economic policymaking, and the market celebrated his pick to lead the central bank: economist and former trader Roberto Campos Neto, who began a fixed four-year term in April.

Neither the office of the presidency nor the central bank responded to requests for comment about Bolsonaro’s statements. Following the story’s publication, Bolsonaro’s chief of staff, Ciro Nogueira, wrote on Twitter that there is no crisis between Bolsonaro and Campos Neto.

“I give my testimony that the relationship of the government with the central bank is excellent, that autonomy of the monetary authority is an historic and irreversible advance,” Nogueira wrote.

Bank autonomy is among few significant economic reforms that Bolsonaro’s administration has managed to secure. Others have faced headwinds, including lately a tax reform proposal, at the same time as the government signals it may boost spending next year despite limited fiscal space.

That has prompted a sell-off due to concerns about Brazil’s fiscal policy outlook, as well as speculation the market could give up hope on the Bolsonaro administration’s will or ability to deliver further reforms — particularly as the president keeps focusing energy on his simmering feud with the Supreme Court.

Twelve-month inflation is tracking at almost 9%, its fastest pace in over five years. After the government drew down pandemic welfare disbursements, the poor have been especially hard hit by double-digit increases in the prices of foodstuffs, cooking gas and electricity.

Economists surveyed by the central bank have raised their 2021 inflation forecast for 19 straight weeks, and the cost-of-living increase is expected to exceed the bank’s target for the first time in six years.

Economists expect 3.9% inflation in 2022, nearly the midpoint of the bank’s target range after creeping upward in recent weeks. Still, the minister who spoke on condition of anonymity told the AP that Bolsonaro has spoken of his concern about out-of-control inflation during the election year.

The Supreme Court is scheduled to begin analysis of the law’s constitutionality on Aug. 25. Bolsonaro voiced support for the court to uphold bank autonomy at a June 22 ceremony, during which he said everyone trusts in Campos Neto.

His statement about regretting autonomy came in response to comments hours earlier from Campos Neto, who the president said he wished he could replace with the stroke of a pen, according to the official present. Campos Neto said in an online event hosted by the Council of the Americas that “local noise” has had an impact on 2022 inflation expectations.

“There is uncertainty, or at least a higher level of noise, in the institutional part of how Brazil works and the fight between powers,” Campos Neto said, adding that the market has also understood the government is seeking to increase spending of its conditional-cash transfer program for the poor.

“In other words, the market is associating some of the actions the government is taking to a will to have a more robust program, and they’re linking some of the things the government is doing with the election, and I think that creates additional noise,” he said. ___ Biller reported from Rio de Janeiro.

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Sources: Brazil’s Bolsonaro vexed by central bank autonomy