Lula’s nominee for presidency of the monetary authority says it is “strange” to determine one’s own objective
The director of Monetary Policy at Central BankGabriel Galípolo, defended this Tuesday (8.Oct.2024) that the body does not participate in defining the inflation target. According to him, it is “strange” that the authority defines an objective that it will have to fulfill.
“I am one of those who argue that the Central Bank should not even vote on the inflation target […] Thinking about a corporation, a company, it is very strange that whoever will have to pursue the goal is responsible for establishing the goal that will have to pursue”said during the hearing at the CAE (Economic Affairs Committee) of the Senate. Galípolo is the nominee to assume the presidency of the monetary authority in 2025 and needs to pass the scrutiny of the House.
The inflation target is defined by the CMN (National Monetary Council), composed of:
- Ministry of Finance;
- Central Bank;
- Ministry of Planning and Budget.
Galípolo mentioned the ongoing inflation target set by the council. The objective is to keep the index at 3%. This level is valid for at least 36 months, or until mid-2027. The tolerance interval was maintained at 1.5 percentage points and the margin will remain at 1.5% to 4.5%.
One of the ways to control the index is to increase interest rates. More expensive credit slows consumption and production. As a consequence, prices tend not to increase as quickly.
“Today we have a target established through the decree, of 3% […] And it is up to the Central Bank to pursue this goal unequivocally, placing the interest rate at the necessary restrictive level, for as long as necessary to achieve this goal”declared the director.
Galípolo signaled once again that there will be an increase in the base interest rate, if necessary. He embraced a tougher stance on monetary policy. It is a way of gaining credibility through an indication of technical management.
Watch the hearing live:
THE INDICATION OF GALIPOLO
The president Luiz Inácio Lula da Silva (PT) made the nomination official from Gabriel Muricca Galípolo to the presidency of the Central Bank on August 28th. It was already an expected movement. The current head of the authority, Roberto Campos Neto, leaves his position on December 31st.
Galípolo is Lula’s ally. He was executive secretary of the Ministry of Finance at the beginning of the current government, in 2023. In other words, he was the minister’s number 2 Fernando Haddad.
The nominee has been director of Monetary Policy at the authority since July 2023. To take up the position, he was also questioned in the Senate. In other words, it is the 2nd time that he has been screened by the House in less than 2 years.
Gabriel Galípolo is 42 years old. He has a degree in Economic Science and a master’s degree in Economics from PUC-SP (Pontifical Catholic University of São Paulo). He started in the public sector in 2007, under José Serra (PSDB), in São Paulo. Find out in this report more details about the director’s life and career.
Gabriel Galípolo participated in 10 meetings of the Copom (Monetary Policy Committee), when the Central Bank decides the level of the Selic (basic interest rate). He voted with President Campos Neto on 9 occasions.
The only meeting of the collegiate in which he disagreed with Campos Neto was in May 2024 – when all Lula government nominees voted for a 0.50 percentage point cut in the Selic. The oldest members opted for a smaller reduction of 0.25 percentage points.
Galípolo raised the tone regarding the conduct of interest rates after the July meeting. It was a way to increase market confidence in Lula’s nominees. The director said that the authority would increase interest rates if necessary.
Lula now has to nominate 3 names for the body: 2 to replace directors who end their term on December 31, 2024 and 1 for the vacancy left by Galípolo.
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