Brazil's Lula says inflation targets too 'rigid'

SAO PAULO: Brazilian President Luiz Inacio Lula da Silva said on Thursday the country's inflation targets were excessively rigid and renewed criticism of the central bank for high interest rates ahead of a meeting that will set its 2026 inflation goals.

Lula's remarks came as financial markets closely watch the National Monetary Council's (CMN) meeting later in the day for potential changes on the targets, which are currently at 3.25% for 2023 and 3% for the next two years.

"Personally, I think Brazil should not have such a rigid inflation target if it cannot meet it," Lula said in an interview with Radio Gaucha. "But it's not prudent for me to talk about the monetary council ahead of its meeting."

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The CMN comprises the finance minister, the planning minister and the central bank governor, giving the federal government two out of three votes on one of the thorniest economic policy debates in Latin America's largest nation.

Lula previously hinted at potentially changing inflation targets to increase them and enable monetary policy easing, a move that ended up worsening expectations for consumer price changes.

The CMN is expected on Thursday to maintain a 3% inflation target for 2026, but there is a growing belief it may tweak the time frame used to assess the goal's fulfillment, ditching the calendar year for a "continuous" target proposed by Finance Minister Fernando Haddad.

"I don't want to influence on the monetary council's decision, they know what to do," Lula said, adding he was just voicing his opinion as a "Brazilian citizen".

The leftist leader also renewed his criticism of the central bank for keeping benchmark interest rates at 13.75%, a level he views as hindering economic growth.

"We need lower interest rates, make them compatible with inflation levels," Lula said.

Annual inflation in the country is currently running around 4%, but an uptick is expected from July because of unfavorable base effects. Brazil failed to meet its inflation goals in 2021 and 2022.