Joseph Stiglitz, Nobel prize for economycalled the levels of fees of Brazil of “amazing”, aligning with a chorus of critics led by President Luiz Inacio Lula da Silva who believe that the country’s borrowing costs impede economic growth.
The economist said on Monday that Brazil’s base rate of 13.75% and the real rate of about 8% above inflation are “enough to kill any economy”.
“Where would you be if you had a more reasonable monetary policy?” asked Stiglitz at an event organized by the BNDES in Rio de Janeiro. High fees are “one of the factors that lead to poor performance over a longer period”.
Since returning to the presidency, Lula and his economic team have repeatedly criticized the Central Bank for keeping the Selic rate at the highest level in six years in order to combat rising inflation expectations triggered by plans to increase government spending.
The clash has worried investors, but so far has not caused the Central Bank to change its approach.
Copom’s monetary policy makers will meet this week for the next interest rate decision, and are expected to keep the Selic at its current level.
Analysts, in turn, raised inflation projections ahead of the meeting, according to the Central Bank’s Focus survey released this Monday. Currently, they expect the interest rate to drop to 12.75% by December.
“What Brazil needs is more investment,” said Stiglitz, a professor at Columbia University. “High interest rates stifle public and private investment.”
Source: Moneytimes
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