Economist Joseph Stiglitz called Brazil’s interest rate levels “shocking”siding with a chorus of critics led by Brazilian President Luiz Inácio Lula da Silva who believe the country’s borrowing costs hamper economic growth.
The Nobel Prize winner said Monday that Brazil’s key rate of 13.75% and the real rate of about 8% above inflation are “enough to kill any economy”.
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“Where would they be if they had a more reasonable monetary policy?” Stiglitz said at an event organized by the Brazilian development bank BNDES in Rio de Janeiro. High rates are “one of the factors that have led to poor performance over a longer period”.
Since he returned to the Brazilian presidency on January 1, Lula and his economic team have repeatedly criticized the central bank for keeping interest rates at a six-year high to combat rising inflation expectations. The shock worries investors but has so far not caused the central bank to change its approach.
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Policymakers will meet this week for the bank’s next rate decision and are expected to keep the benchmark Selic index at its current level. Analysts from Brazil, meanwhile, inflation expectations raised ahead of the meeting, according to a weekly central bank survey released Monday. They currently project that interest rates will have fallen to 12.75% by December.
“What Brazil needs is more investment”said Stiglitz, a Columbia University professor. “High interest rates stifle both public and private investment.”