The autonomy of the Central Bank

Image: Caroline Cagnin


Central Bank policy is in open conflict with the objectives for which Lula was elected

Since when, years ago, an overwhelming neoliberal wave swept the world, there has been a systematic chant in the main communication organs in the country defending the sacrosanct theses of Faria Lima. Topics such as the autonomy of the Central Bank received privileged treatment, but without the contradictory summoned to discuss and explain, only economists linked to banks and financial institutions.

It has always been like that. Nobody was called to counter-argument. After all, it was necessary to leave the impression to public opinion that there were no disagreements on topics like this, there was almost unanimity. For them there are no different economic thoughts on different topics. There is a unique view, as if it were a one-way road. That is, the market view had to prevail. And this has been done when it comes to issues of interest to the market, such as the autonomy of the Central Bank.

Approved in 2019, during the Bolsonaro government, in the dead of night, without much discussion, implying that it had obtained general approval. Contributing to this, of course, was the demobilization of trade union centrals and social movements and opposition parties. Even because a good part of the so-called left is strongly influenced by neoliberal theses. This is how the herd passes. They ate flies, when they woke up it was already Lula's government suffering all the constraints and spells of the neoliberal debris left by Jair Bolsonaro.

Even so, they still haven't learned their lesson. In this discussion about the interest rate, 13,25% of the Selic, incredible as it may seem, Roberto Campos Neto sets the tone. He says in all letters that his decision to maintain interest rates is essentially technical. I mean, there's no debate. No one questions! Well, it's not technical at all, it's purely political. It would be technical if it did not have different views on the causes of inflation and alternative solutions to combat it. Which is obviously not the case.

There is almost a consensus that inflation is not due to demand, but to costs. Therefore, it is not appropriate to misuse the increase in interest rates to curb consumption with credit restrictive measures. These are measures that go against the grain and further aggravate the resumption of growth. In addition to flattening the demand for goods and products, it inhibits investments by raising financial costs.

The Central Bank's policy is in open conflict with the objectives for which Lula was elected, namely, to get out of the recession and generate jobs and income. Still, with high interest rates, it also conflicts with the fiscal austerity policy, so proclaimed by Faria Lima. Each 1% increase in interest rates adds R$38 billion to the public debt. It's like wiping ice. There cannot be this disharmony between fiscal policy and monetary policy. This Central Bank autonomy provoked this, it is a contradiction. It is an antagonistic contradiction. This cannot be compromised, at the risk of sinking and being permanently towed by the Central Bank.

Even with all the difficulties of this trap, it is necessary to take the political initiative and mobilize the population to take to the streets and not only change the president of the Central Bank, but take away its autonomy. It is difficult politically, yes, especially with this Congress. Even Artur Lira saying that the breakdown of autonomy will not pass, it is important to put this on the agenda and call on the population to take to the streets.

If you depend only on behind-the-scenes negotiations, for each project that needs to be approved, assign ministries and amendments, the correlation of forces will not change and the government will have to give in more and more, as the Centrão's appetite is insatiable. At times like this, when there is almost unanimity around the drop in interest rates, it is important to mobilize the population and change the correlation of forces. For that, it needs to politicize this discussion and remove it from the technocratic chalk circle in which it was placed by Roberto Campos Neto.

*Fernando Netto Safatle is an economist. He was Planning Secretary of Goiás, during the government of Henrique Santillo (1986-1990). Author, among other books, of The political economy of ethanol (Mall).

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