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Mar 20, 2023
Stiglitz Joins Lula in Slamming Brazil’s Interest Rate Levels
(Bloomberg) -- Economist Joseph Stiglitz called Brazil’s interest rate levels “astounding,” aligning himself with a chorus of critics led by President Luiz Inacio Lula da Silva who believe the country’s borrowing costs are hindering economic growth.
The Nobel Prize winner said on Monday that Brazil’s key rate of 13.75% and real rate of around 8% above inflation are “enough to kill any economy.”
“Where would you have been if you had more reasonable monetary policy?” Stiglitz said at an event hosted by Brazil’s development bank BNDES in Rio de Janeiro. High rates are “one of the factors that have led to poor performance for a longer period.”
Since returning to the nation’s top job on Jan. 1, Lula and his economic team have repeatedly taken aim at the central bank for keeping interest rates at a six-year high in order to battle rising inflation expectations, which have grown out of the leftist leader’s plans to boost government spending. The clash has worried investors but so far has not caused the central bank to alter its approach.
Read More: Faltering Economy Endangers Lula’s ‘Barbecue and Beer’ Promise
Policymakers will gather this week for the bank’s next rate decision and are are widely expected to hold the benchmark Selic at its current level. Brazil analysts, meanwhile, raised inflation expectations ahead of the meeting, according to a weekly central bank survey released Monday. They currently expect interest rates to fall to 12.75% by December.
“What Brazil needs is more investment,” Stiglitz, a professor at Columbia University, said. “High interest rates stifle both public and private investment.”
--With assistance from Bruna Lessa.
©2023 Bloomberg L.P.
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