The Minister of Finance, Fernando Haddadsays that Brazil has “fat” that the world does not have and warns of the impact of the SVB bankruptcy on interest rates

Minister says he does not expect a systemic crisis, but indicated that the episode could impact the course of monetary policy in several economies.

The Minister of Finance, Fernando Haddad, said, this Monday (13), that there is little room for raising interest rates in the world and that Brazil has a “fat” to possibly reduce the Selic, currently set at 13.75% per annum.

“Today there is little room to increase interest rates in the world and I would say that there is a fat in Brazil that allows us, taking the measures that are being taken and have been recognized by the Central Bank in the minutes that it publishes… I think we have a space [to reduce interest rates] that the world does not have,” he said.

Asked about the global consequences of the bankruptcy of Silicon Valley Bank (SVB) in the United States, Haddad said he did not expect a systemic crisis, but indicated that the episode could impact the course of monetary policy in several economies.

“I haven’t seen anyone yet treat this episode like a Lehman Brothers, but the fact is that what happened is serious. The Fed (Federal Reserve, US monetary authority) acted at the end of the week, and we will see throughout the day whether the monetary authority in Brazil will have to take any action due to the effects on the peripheral economies, ”he said.

“We are in fine tune with the Brazilian banks and with the president of the Central Bank. We will have more clarity throughout the day, ”he assured.

The minister participated in the event “And now, Brazil? Tax reform and Brazil‘s economic challenges”, carried out by the newspapers O Globo and Valor Economico in Brazil.

 During the panel, Haddad defended the holding of debates on technical issues without dogma, such as the issue of the inflation target in Brazil and the time horizon for the Central Bank to pursue the objective. The minister also defended that monetary authorities consider the consequences of their actions in the pursuit of achieving inflation targets in times of crisis.

“JeromePowell (Fed chairman) statements last week were that he would not stop here, that he would continue to seek the center of the target. But the prudential call comes into play. What is the prudential limit you have to increase interest rates without disorganizing the economy as a whole, the productive sector? And there are sectors that will say that there will come a time when you will hit this limit, when it will be more difficult to reach the center of the goal in a very short period, ”he said.

For him, after the bankruptcy of SVB (an episode that he interpreted as a consequence of an abrupt increase in interest rates in the United States, in addition to the company’s wrong decisions and regulatory problems), “people will start to look at a longer horizon to accommodate the tensions and prevent a bigger crisis” that causes an increase in unemployment.

In the case of Brazil, Haddad repeated that “if we harmonize fiscal and monetary policy, we can anchor expectations and navigate in turbulent international seas”. “We are prepared for any scenario”, he maintained.

“Brazil has a growth potential above the world average, if we make occasional adjustments, but without any surprises and without having a commitment to make changes that will not positively impact the scenario”, he said.