Interest rates continue creating fissures between govts and central banks in Brazil

Brazil President Luiz Inacio Lula da Silva said on Monday that there is no explanation for keeping the country's benchmark interest rate at the current 11.25 per cent level apart from the "stubbornness" of central bank president Roberto Campos Neto, Reuters reported.

The latest statement again shows the serious difference of opinion between the political leaders and the central banks around the world, especially in developing countries which need and want more economic growth, over how and when to slash the interest rates which were raised to deal with the historic high inflation.

Since August, Reuters says, Brazil's central bank has cut the country's benchmark Selic rate by 250 basis points, after it held the rate for about a year at its highest level since 2016.

Still, "there is no explanation for the Selic rate to be at 11.25pc," Lula said in an interview with local TV channel SBT. "There is no economic explanation, no inflationary explanation. There is nothing, apart from the stubbornness of the central bank's president over holding these interest rates," he added.

Lula's relationship with Campos Neto has improved in recent months following a series of attacks on the central bank chief last year, specially concerning the Selic rate's level, which at some point had raised investor concern about his commitment to the bank's independence.

In the interview, Lula said he has "civilized conversations" with Campos Neto, but added the central bank's chief is contributing to a delay of Brazil's economic growth.

Politicians and bankers live in two different worlds. A politician thinks in terms of running the country according to his ideals, goals and policies while dealing with the economic, social and political issues in the best interests of the people who he relates with.

A banker, on the other hand, keeps the accounts for maintaining a healthy balance sheet. People’s problems, their pains are not his concerns. In other words, his vision is always limited.