Brazilian Senate confirms new Central Bank directors

The Brazilian Senate on Tuesday confirmed Gabriel Galípolo and Ailton Aquino as two new Central Bank directors. 

Mr. Aquino was confirmed as the next oversight director and the first black person to be on the Central Bank’s board. Mr. Galípolo — who briefly served as deputy finance minister — will become the next monetary policy director and have a seat at the Monetary Policy Committee, which decides on Brazil’s benchmark interest rates, currently set at 13.75 percent. He will be an ally for the government in defending cuts to the rate.

Since 2021, the Central Bank has operational autonomy to pursue the government’s inflation target, with directors named for four-year terms that do not coincide with the presidential term. 

The bank’s restrictive monetary policy has been a source of friction between central banker Roberto Campos Neto, an orthodox economist appointed by former President Jair Bolsonaro, and President Luiz Inácio Lula da Silva, a staunch defender of a dovish economic policy. (The Brazilian Report had last year anticipated that would happen.)

Mr. Galípolo is considered a moderate left-leaning economist who can handle the political aspects of the job. His nomination is seen by markets as the government grooming him for the central banker position. Mr. Campos Neto’s term expires at the end of 2024, and he is not expected to be nominated for a new term by the current left-wing president.

Last week, the Central Bank said that its Monetary Policy Committee is leaning toward cutting benchmark interests in the near future, with many economists believing that will happen as soon as the next August meeting. Meanwhile, the markets’ median year-end inflation forecasts are converging toward the inflation targets, adding to that perception. 

During his confirmation hearing in the Senate Economic Affairs Committee, Mr. Galípolo touted economic results posted during the first half of the year, which included the Finance Ministry’s pursuit of a new fiscal framework and a tax reform. 

“The measures implemented so far resulted in the strengthening of our currency; forecasts of a smaller primary deficit; the approval of a concept for a new fiscal rule; higher growth projections; lower inflation; and the market is already projecting lower interest rates and future interest rate cuts,” he said.

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