BRASILIA - Finance Minister Dario Durigan said the government's recently relaunched consumer debt relief program will not deliver fiscal stimulus large enough to derail Brazil's ongoing monetary easing cycle.
Speaking on the TV program Roda Viva late on Monday, Durigan characterized the program's impact as limited, saying it "seems quite contained." The initiative, which the government reintroduced on Monday, was first launched in 2023 and is intended to lower interest burdens on households and bolster disposable income in the run-up to President Luiz Inacio Lula da Silva's re-election bid in October.
When asked whether fiscal developments were putting pressure on monetary policy, Durigan pointed to external factors instead. "Is the fiscal picture pressuring monetary policy today? No, it is the war," he said, referring to the U.S.-Israeli conflict against Iran, and noting that the situation has contributed to higher oil prices.
Durigan's comments come after the Brazilian central bank cut its benchmark interest rate for a second consecutive meeting by 25 basis points last week, lowering the Selic rate to 14.5% following an extended period of ultra-restrictive policy aimed at bringing inflation down to the official 3% target. Inflation is currently running at 4.37%.
"Is the fiscal picture pressuring monetary policy today? No, it is the war,"
On the question of adjusting the inflation target, Durigan told the program he opposes changing it.
Durigan also addressed the trajectory of mandatory spending, which has risen rapidly under President Lula's administration. He argued that mandatory spending needs to be reined in over time and suggested one possible avenue would be to revisit parameters of the country's fiscal framework that was approved in 2023.
The fiscal framework passed under Lula combines primary budget balance targets with a cap that limits spending growth to up to 2.5% above inflation. Durigan added that imposing limits on transfers from the federal government to the Federal District government is another measure that needs to be implemented.
Durigan's remarks link fiscal discipline, central bank policy, geopolitical risks and energy price dynamics in a compact policy narrative: the consumer debt relief program aims to ease household burdens but, in the minister's view, does not by itself threaten the nascent easing of monetary policy amid other forces shaping inflation and public finances.