BRASILIA (Reuters) – Brazil’s Finance Minister Fernando Haddad said on Wednesday he expects the basic interest rate to fall to “at least” 12% by year-end, emphasizing ample scope for monetary easing.
The central bank has maintained its benchmark interest rate at a cycle-high of 13.75% since September 2022, but it has signaled that most of its policymakers see room for a “parsimonious” rate cut at next week’s meeting.
In an interview with the news portal Metropoles, Haddad said that keeping rates at their current level would surprise the world and could undermine Finance Ministry efforts to restore fiscal balance.
Haddad refrained from answering how much the initial cut should be, but said 70% of the market now prices a reduction of 50 basis points.
The minister also emphasized the need to update the legislation on closed-end funds to boost revenue for the 2024 budget bill, which must be presented to lawmakers by August.
The government continues working with an expectation of a 2023 primary budget deficit of around 1% of gross domestic product (GDP) to bring it to zero next year, he added.
When asked about a potential re-election bid of President Luiz Inacio Lula da Silva, Haddad expressed clear support, while noting that the final decision rests with Lula himself.
The government will field a candidate in the upcoming 2026 presidential elections, who will either be Lula or someone who represents the vision led by the president, Haddad added.
Haddad’s ties with Lula strengthened during the 2018 presidential campaign, in which he stood as the Workers Party (PT) candidate after Lula was barred from the race due to graft convictions that were later overturned.