(Bloomberg) -- Brazil President Luiz Inacio Lula da Silva said he and Finance Minister Fernando Haddad still have to agree on a new central bank governor, as investors mull whether the change could alter the nation’s monetary policy.
Lula told reporters in Brasilia on Monday that he expects to decide on a candidate who is technically competent, as well as honest and serious. The nominee should show autonomy in terms of both behavior and the ability to be respected, Lula said, while also reinforcing concerns about economic growth.
“We are working to reduce interest rates, which is the biggest impediment to more vigorous growth in Brazil,” Lula said. “The central bank needs to think a little bit more about the country.”
On public expenditures, the leftist president said the government will implement spending freezes when it’s necessary and that fiscal responsibility is something he feels “in his guts.”
Investors are still pricing in rate hikes this year amid uncertainty about monetary policy in Latin America’s largest economy after central bank Governor Roberto Campos Neto’s mandate ends. Lula, who has called for lower borrowing costs to boost growth, will get to tap a new bank chief and two directors, meaning he will have named a majority of board members. Financial markets also remain wary of increasing spending as well as any signs the administration is backing off pledges to tame public debt and meet budget goals.
“The real and interest rate futures got an additional kick” after Lula’s comments on fiscal policy, which were more in line with financial market views, said Gustavo Okuyama, a portfolio manager at Porto Asset.
The real gained 0.9% to 5.5493 in early afternoon trading on Monday. Swap rates on the contract due in January 2026, which are a gauge of market sentiment toward monetary policy at the end of next year, fell 11 basis points.
Lula said it’s important to help the economy grow and redistribute wealth, in addition to controlling inflation. “My responsibility with inflation is bigger than that of any other citizen in the world.”
Policymakers led by Campos Neto are seen holding interest rates steady at 10.5% next week for the second straight meeting. Analysts lifted their annual inflation estimates for this year to 4.05%, above the 3% target, according to a central bank report published on Monday.
--With assistance from Maria Eloisa Capurro and Felipe Saturnino.
(Adds comments on fiscal policy in fourth paragraph)
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