On March 22, Brazil’s Central Bank kept the country’s benchmark interest rate unchanged at 13.75 percent. The rate has been at this level since August 2022, not budging for the last five monetary policy meetings.

But as is often the case in Brazil, a seemingly boring economic decision has been transformed into a passionate soap opera. This time, for instance, the struggle concerns the difference of opinion between President Luiz Inácio Lula da Silva and the bank. 

The central point of their disagreement is precisely the benchmark interest rate, which Lula is desperate to have reduced. 

Lula called the current rate “absurd,” promising to “keep fighting” for lower figures. In support of Lula’s stance, trade union groups even protested in front of the Central Bank during the week, calling for the resignation of the bank’s chairman, Roberto Campos Neto. 

But Lula can’t win every battle, and the government has to deal with that. 

Despite the pressure, the monetary policy committee stood firm and stuck to its guns. Furthermore, it issued a surprisingly hawkish statement to accompany its decision. Not only did it not leave the door open to rate cuts soon, it even suggested the interest rate could be increased depending on inflation. 

Yet, this week’s events are a good indication of how the president can’t have full control over everything. And the interest rate game is just one of many battles Lula will have to fight between now and the end of his term. 

Go deeper: Brazilian Central Bank more hawkish than expected

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