The president of Brazil’s Central Bank, Henrique Meirelles, says that the higher
primary account surplus and the lower ratio between debt and GDP will mean lower
interest rates in the medium term for Brazilians.
Meirelles declared that the adjustments to ensure growth in 2005 were being made in monetary and fiscal policy.
“The adjustments will ensure sustainable growth. Not just for 2005, but for many years. Growth has been strong this year and will continue in 2005,” he said.
Meirelles pointed out that fiscal policy cannot substitute monetary policy, although both are essential for stability, reducing the country’s vulnerability and achieving consistent investments.
It is important to keep the two policies finely tuned so Brazil can have lower interest rates and sustainable growth, he said.
According to Meirelles, the decision to raise the basic interest rate (Selic) was correct (it went from 16% to 16.25%) because it will support growth.
He added that the Selic could rise again even with the higher primary account surplus target (which went from 4.25% of GDP to 4.5%).
“The message we have is clear: Brazil is growing strongly. Businessmen who want to maintain their market shares will have to invest, even with higher interest rates,” said the Central Bank president.
Translator: Allen Bennett