Brazil Government Resists Bid to Make Central Bank Target Growth
Brazil Government Resists Bid to Make Central Bank Target Growth
(Bloomberg) -- Brazil’s government is trying to fight off a move by some lawmakers to force the central bank to target growth as well as inflation, at a time when the country is trying to grant the monetary authority independence.
Opposition lower house deputies plan to present an amendment to the bill that would set an additional target for the central bank - either employment or growth level - alongside its mandate to keep prices stable. In the Senate, the movement is spearheaded by the largest party, the MDB.
The dual mandate is opposed by central bank president, Roberto Campos Neto, who was appointed by President Jair Bolsonaro. Campos Neto has repeatedly argued that the best way the central bank can contribute to growth is by sustaining an environment of low and stable inflation.
Supporters of the dual mandate in congress are arguing that the U.S. Federal Reserve also has a growth mandate.
The central bank declined to comment.
Brazil Central Bank Chief Leads Offensive on Autonomy Bill
The autonomy bill is intended to safeguard the Brazilian monetary authority from political interference, in a country where governments have often tried to pressure policy makers to prioritize growth over price stability. The bill seeks to establish fixed terms for central bank board members and strict rules for the removal of any director.
The bill is ready to be put to a vote in the lower house. The leader of the pro-business DEM party, Efraim Filho, says it will be sent to the floor when a solid majority in favor of the proposal is built up, probably in late March.
Unlike regional peers like Chile and Mexico, the central bank in Brazil doesn’t have formal autonomy from the government. Its head is named by the president and has a similar rank to cabinet ministers.
The legislative push comes as policy makers from the Fed to the European Central Bank face political pressure over their inability to end a decade of weak growth. U.S. President Donald Trump has repeatedly criticized the monetary authority on Twitter for its perceived reluctance to cut rates further to help growth.
Unemployment
The proposal for a dual mandate is supported by several centrist lawmakers, who compose the most powerful force in congress.
Jose Nelto, deputy-leader of the centrist Podemos party, said he backs the dual mandate as a tool to tackle poverty.
“It is our duty as politicians to promote growth and improve people’s lives,” he said in an interview.
The leader of the Cidadania party, Arnaldo Jardim, said in an interview that he welcomes discussions over the broader role of the central bank.
“The central bank needs to stop only caring about monetary policy”, said Enio Verri, leader of Workers Party, the largest opposition party who will be responsible for proposing the amendment to vote. “It needs to act against unemployment”.
To contact the reporters on this story: Mario Sergio Lima in Brasilia Newsroom at mlima11@bloomberg.net;Samy Adghirni in Brasilia Newsroom at sadghirni@bloomberg.net
To contact the editors responsible for this story: Juan Pablo Spinetto at jspinetto@bloomberg.net, Mario Sergio Lima, Matthew Bristow
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