Brazil Central Bank Charter Change Won’t Affect Rate Policy, Senator Says

Proposed legislation to expand the Brazilian central bank’s mandate to stimulate the economy and employment won’t affect monetary policy because the institution is already targeting growth, the bill’s sponsor said.

A Senate committee approved Nov. 1 in a unanimous vote a bill that would broaden the bank’s charter, which is limited to targeting inflation and guaranteeing stability in the financial system. The bill was drafted by Senator Lindbergh Farias, a member of President Dilma Rousseff’s Workers’ Party, and still needs to be voted on the Senate floor before being sent to the lower house for consideration.

“Rousseff has been speaking about this in all her speeches since the beginning of the year: the goal of economic policy is twofold -- monetary stability and economic growth,” Lindbergh said in a phone interview from Rio de Janeiro. “The central bank is already acting this way. It is cutting interest rates because it sees a scenario in which the economy contracts.”

Policy makers reduced Brazil’s benchmark interest rate by half a percentage point at each of its past two meetings, saying “moderate” rate cuts will help protect Latin America’s biggest economy from slower growth in the U.S, China and Europe. The cuts won’t jeopardize the goal of bringing inflation down to the 4.5 percent target next year from a six-year high 7.31 percent in September, the central bank said in the minutes to their Oct. 18-19 meeting.

Brazil’s inflation rate has remained above the 6.5 percent upper limit of the government’s target range since April.

To contact the reporter on this story: Maria Luiza Rabello in Brasilia at mrabello@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.