Itau Economist Goldfajn Named Brazil’s Central Bank Chief

  • Goldfajn’s nomination must still be approved by Senate
  • Meirelles didn’t provide details on the board of directors

World Bank's Levy: Brazil's Currency Holding Up Well

Brazil’s finance minister nominated Itau Unibanco Holding SA’s chief economist Ilan Goldfajn to head Brazil’s central bank and proposed a constitutional amendment to grant the top monetary authority operational autonomy.

Finance Minister Henrique Meirelles also said that Goldfajn, who must still be confirmed by the Senate, would not form part of Acting President Michel Temer’s cabinet and that the constitutional amendment would grant all central bank directors special legal status, meaning they can only be sued before the Supreme Court.

The move aims to reduce political pressure and provide heightened legal protection to the central bank and its directors, after years of perceived government meddling in monetary policy, said John Welch, an economist at Canadian Imperial Bank of Commerce and long-time Brazil watcher.

“It’s a good economic team, Ilan is a good name,” Welch said in a phone interview. “They’re giving them the right legal and political conditions to do their job.”

Meirelles also appointed Mansueto de Almeida as secretary for economic monitoring and Carlos Hamilton as secretary for economic policy in the Finance Ministry. Meirelles said he would discuss the rest of the board of central bank directors with Goldfajn later on Tuesday.

Economic Forecasts

Temer has said since taking the top job last week that his priority is to put the economy back on track as above-target inflation, double-digit unemployment and a near-record budget deficit erode consumer and business confidence. Analysts surveyed by the central bank this week forecast inflation will slow this year and next even as they see the benchmark interest rate falling.

Meirelles said the government’s proposal for operational autonomy would write into the constitution what so far has been only a verbal understanding.

“That’s already an enormous advance,” he said, adding that full independence with fixed mandates for central bank directors was a political debate for another time.

The central bank’s current president, Alexandre Tombini, has raised borrowing costs to a nine-year high in an effort to damp inflation that has remained above the government’s target since he took the helm in 2011. The Senate probably won’t decide on Goldfajn’s nomination until mid-June, meaning he would miss the next rate decision that is scheduled for June 7-8, said Senator Gleisi Hoffmann, president of the chamber’s Economic Affairs Committee.

Brazil’s interest rate swaps dropped after Goldfajn’s nomination, before gaining ground with yields paid on the contract maturing January 2017 up 6 basis point to 13.66 percent in mid-afternoon trading. The real was little changed and the Ibovespa stock index dropped.

Goldfajn is the latest member to join the core of Temer’s economic team, which also includes Meirelles and Budget Minister Romero Juca. Meirelles has experience both on Wall Street and as a former president of the central bank, while Juca is an experienced legislator and political confidant to Temer.

Temer on Monday appointed former steel industry executive Maria Silvia Bastos Marques to head up Brazil’s state development bank BNDES. The previous administration of Dilma Rousseff drew heavily on the lender, along with other state banks Banco do Brasil and Caixa Economica, to boost the economy with corporate and consumer loans as well as mortgages.

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