(Bloomberg) -- Brazil’s central bank president said it’s necessary to understand that there are several reasons why the country’s neutral structural interest rate is so high, including fiscal policy, and it’s important to fight the cause of the problems.

If interest rates on their own were the cause, it would be just a matter of lowering them, Roberto Campos Neto said Saturday at an event in the city of Guaruja, on the coast of Sao Paulo state. “Obviously, we would like to have the lowest interest rate possible, but our structural interest rate is high.”

Campos Neto also defended the central bank’s processes, including its autonomy and credibility when dealing with the benchmark rate. 

“If we determine the one-day rate in such a way that it has no credibility, what will happen with this long real interest rate? Will it rise or will it fall? It will go up,” he said. 

Periods in Brazil’s history in which the long real interest rate fell “were exactly at moments where people understood that there was credibility in economic policy,” he said. “When we introduced the spending ceiling, it fell; when the fiscal framework came, it fell. So, what we need to understand is that there is no point confusing cause and consequences.”

Campos Neto also defended the inflation targeting system, saying “more than simply looking at the short-term number, the important thing is sustainability.” 

“The important thing is this stability, not what is done on a daily basis. And it is important in this stability that we have the agents’ perception that the debt will converge at some point. It may not converge this year, it may be next year, but it’s important to have debt convergence.”

Last month, Campos Neto, who was appointed by right-wing former President Jair Bolsonaro, led the majority of central bank board members who decided to cut the benchmark rate by a quarter-point, to 10.5%. All four directors appointed by current President Luiz Inacio Lula da Silva, however, favored a larger, half-point cut.

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