Brazil’s Finance Minister, Antonio Palocci, declared that rising interest rates is not “capricious” and that the Brazilian Central Bank is not as conservative as some people think it is.
According to Palocci there is a very good reason for the country’s high interest rates: inflation control.
“Inflation control is our priority. Now it is true that our interest rates are higher than in other countries. But, at the same time, there is no evidence that the rate is higher than it needs to be in order to keep inflation under control,” said the Minister, as he pointed out that if interest rates were too high inflation would be lower than government targets – which it is not.
Brazil’s benchmark interest rate (known as the Selic) has risen steadily month by month since September 2004, until reaching 19.75% per year in July 2005. In August the rate remained unchanged.
Palocci also said that in the economic area “Brazil is beginning to be a normal country,” thanks to the efforts of not only the Luiz Inácio Lula da Silva administration, but other administrations before it.
Palocci said one of the principal factors in the country’s sound economic situation was inflation control. It has resulted in real growth, employment and expansion.
“Brazil is becoming a country with an economy that is sound and tidy. Looking ahead, I think we will have more than just a year or two of growth. The country is definitely on the road to stability. There is more wealth and it is being distributed better,” said the Minister.
In conclusion, Palocci pointed out that corporate profits and job creation were higher now than they have been in the last two decades.