BC President criticizes debate on interest rates in Brazil: 'it looks like a fight between organized fans and a post on social media'

The president of the Central Bank, Gabriel Galípolo, criticized the debate about the high level of interest rates in the Brazilian economy, its repercussions on public debt and, also, on defaults and the high level of indebtedness of the Brazilian population.

Currently, the Selic rate, set by the Central Bank, is at 13.75% per year, after the Monetary Policy Committee (Copom) interrupted the cutting process last week.

In real terms, that is, after reducing the inflation forecast for the next 12 months, Brazilian interest rates are 9.49% per year. It is the highest level in the world.

The president of the BC contested assessments on social media that the rate set by the Central Bank is the one that determines the interest charged by the financial market to the population, companies, and in the so-called "public debt rollover", that is, in the issuance of bonds by the National Treasury to finance part of the federal government's spending.

"The economic debate is more heated than organized fan disputes and posts on social networks. The philosopher Harari [Yuval Noah Harari] once said that 'truth is expensive' and that it requires us to investigate, contest, go after data. It is expensive to go after the truth. Lies are cheap, fiction is cheap", said Galípolo, at a Barclays bank event.

Galípolo noted that the Central Bank's Copom, in its meetings every 45 days, sets short-term interest rates. And the interest rates in the financial market, which guide loans and sales of securities by the federal government, are not set by the monetary authority.

Analysts note that the interest rates negotiated in the market for longer terms (which serve as the basis for the sale of public bonds) reflect the expectations of economic agents for public spending and activity, among others, and, consequently, for inflation.

"I have a pedagogical challenge to explain that the formation of monetary policy interest rates [Central Bank decisions] takes place in a different process than the [financial market] interest rate curve. It is quite complex to explain this to people. It is easier to explain that a group of people can decide the interest rate they want and that, for some reason, they don't do it", stated the president of the Central Bank.