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By Rodrigo Campos and Dan Burns
NEW YORK (Reuters) – Brazil’s central bank President Roberto Campos Neto said on Thursday that any replacement of the country’s fiscal target would raise concerns, following comments by President Luiz Inacio Lula da Silva that cast doubt on the government’s willingness to erase the budget deficit.
Campos Neto told the Reuters NEXT convention in New York that “there is a lot of uncertainty about Brazil’s ability to adopt a sustainable fiscal path,” adding that this is raising threat premiums and affecting policy. monetary.
“The only explanation for why the central bank is involved in this is not because of the fiscal target itself, but because it affects variables that are vital to our decision-making process,” he said, mentioning the possible effects on the exchange rate and interest rate futures markets.
Last October, Lula said his government did not want to cancel its main budget deficit next year, as had been proposed to Congress under new fiscal regulations, comments that rattled money markets and replaced interest rate forecasts.
Since then, Finance Minister Fernando Haddad has largely reaffirmed Brazil’s commitment to a “balanced budget,” but lawmakers interested in next year’s budget bill are making it clear that they are aiming for the 0-deficit target.
In Thursday’s interview, Campos Neto noted that Brazil has passed vital reforms since the COVID pandemic, adding a review of admission taxes, which was approved by the Senate on Wednesday, but expressed uncertainty weighing on budget policy.
“And that influences a lot of variables that affect us when it comes to making financial policy decisions,” he added.
(Reporting by Rodrigo Campos and Dan Burns; writing by Marcela Ayres; editing by Mark Porter, Brad Haynes and Nick Macfie)