Luiz Marinho criticized the current interest rate level; declared that the monetary authority needs to know “fundamentals of the economy”
The Minister of Labor and Employment, Luiz Marinho, criticized this Wednesday (27 March 2024) the Central Bank’s monetary policy in relation to interest rates. “We have to align better. Study more. We need to study the fundamentals of economics a little”he told journalists.
According to the minister, the strategy of increasing the basic interest rate, the Selic, to control inflation “It’s the dumb way to do it”.
Luiz Marinho graduated in law from União Bandeirante de Educação, which is located in Vila Guilherme, in São Paulo.
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“I’m not even criticizing the Central Bank. I’m just warning them that they have to look better. Study more. It is necessary to study a little, the fundamentals of economics. There are two ways to control inflation, as I already said: one way is to restrict it. It’s an increase in interest rates, a cut in credit. Yes, you can control inflation here, but it’s the stupid way to do it. The smart way is to control inflation through supply. In other words, companies need to reach the following easy conclusion: we will grow jobs. There is investment for that. Investments are happening. You will grow the number of jobs. Consumer demand will grow. Companies should not expect merchandise on the supermarket shelf. They have to anticipate the speed of the line by hiring more people, offering more products. This is how to control inflation intelligently. So, what is often missing from the Central Bank is to draw attention to this data on planning in the private world, which is somewhat what happened in the government no 2. Everything was debated, and is being debated again in the Social Development Council , so there the companies, the leaders, the employers’ unions, the federations, disseminate an optimistic vision for the market, for the companies, that look, get ready to produce more, get ready to hire, get ready to offer and be able to increase up to your gain. Bet on the scale, not on individual gains. This way, inflation is controlled without the need to restrict interest increases or credit restrictions. For a period in Brazil, it was the only thing they knew how to do. Oh, is there inflation? Then interest rates rise. Oh, is there inflation? So it restricts credit. Obviously there is chaos there. Here, at the other end, it generates unemployment. We need to work to provide support, to welcome, to welcome new workers who need work, formal work, not precarious work. I do not work analogous to slavery. Exploitation of child labor. Productivity comes through investment. Eventually, there is a lack of productivity because companies have insufficient investments in improving equipment. Businesspeople need to come to the table, knock on the doors of BNDES, Caixa, Banco do Brasil, Banco do Nordeste, public and private banks, to say the following: ‘We need to reformulate the machines that are eventually obsolete’ . Some of Brazil’s machines are obsolete. This is where you will generate more productivity. Therefore, I invite the Central Bank to delve deeper into this debate on Brazil’s productivity. We need to take an in-depth look at the specificities of each sector to see what is happening, so we can really talk about productivity. This applies to the energy transition, this applies to the transitions we are undergoing. I’m sure we will increase productivity if we act this way. If it doesn’t increase productivity, it will be here and there. But if there is a process, in fact, of deep investments, analyzing each sector, we will see gains in productivity”.
The Central Bank reduced the base interest rate from 11.25% per year to 10.75% per year on March 20th. It was the 6th time that there was a decrease of 0.50 percentage points in the indicator.
However, the monetary authority signaled that the last cut followed by half a percentage point in the basic rate should be carried out at the Copom (Monetary Policy Committee) meeting on May 7th and 8th. The falls may be smaller or not even exist in subsequent encounters.
Marinho says that reducing interest rates must be done by encouraging companies to create jobs. The government announced this Wednesday (27th March) that Brazil created 306.1 thousand formal jobs in February 2024 – an increase of 21.2% compared to the same month in 2023
The current level of Selic is the target of constant criticism from President Luiz Inácio Lula da Silva (PT) and his allies, even after the cuts began.
On March 11, the PT member said that the president of the Central Bank, Roberto Campos Neto, contributes to a “monetary delay” in Brazil.
“There is no explanation for the Selic interest rate to be 11.25%. There is no economic explanation, no inflationary explanation. There is nothing other than the stubbornness of the president of the Central Bank in maintaining this interest rate”said Lula in an interview with SBT.
