Brazilian lawmakers aligned with President Dilma Rousseff are proposing legislation that would broaden the central bank’s mandate to include fostering economic growth and job creation.
The Senate’s economic affairs committee approved today a bill proposing the changes to the bank’s charter, which is limited to targeting inflation and ensuring stability in the financial system, the Senate’s news agency said on its website. The bill, which needs to be voted on the Senate floor before being sent to the lower house for approval, was drafted by Senator Lindbergh Farias, a member of Rousseff’s Workers’ Party.
“We see it as one way to make official what is already the case: that the Banco Central do Brasil is in effect pursuing a growth target, with full backing of the government,” Tony Volpon, a Latin America strategist at Nomura Holdings Inc, said in an e-mailed note to clients about the proposed legislation.
Policy makers reduced the benchmark interest rate by half a percentage point at each of its past two meetings as it seeks to protect the domestic economy from slower growth in the U.S., China and Europe. “Moderate” cuts to the benchmark interest rate won’t compromise policy makers’ 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 since April.
If the central bank were solely targeting inflation, it wouldn’t be cutting interest rates, Farias said, according to Agencia Senado.