Brazils Vice President Geraldo Alckmin, addressing a So Paulo seminar on March 24, 2025, calls for the Central Bank to exclude food and energy prices from its interest rate formula.He argues that these volatile sectors distort the Selic rate, now at 14.25%, and hinder economic stability.
His plan echoes the U.S.
Federal Reserves focus on core inflation to steady monetary policy.Alckmin, also Development Minister, points to droughts and global tensions driving up food and energy costs.
Brazils IPCA inflation reaches 1.31% in February, hitting 5.06% over 12 monthsexceeding the 3% target for 2025.Electricity prices soar 20%, and food inflation climbs 7%, straining households where food and housing take 40% of budgets.
He contends that high rates inflate borrowing costs, slowing an economy projected to grow 2.2% in 2025down from earlier estimates.Alckmin insists raising rates wont solve climate-induced shortages or energy spikes, proposing instead to target specific sectors.
This, he says, shields workers whose wages lose value as prices rise.Brazils Vice President Challenges Central Bank on Interest Rate Strategy.
(Photo Internet reproduction)Brazils Economic Challenges and the Central Banks LeadershipCritics argue that ignoring food and energy masks real inflation in a country tied to agriculture and exports like soybeans.
With public debt nearing 80% of GDP, any miscalculation could erode trust in the Central Bank.The bank is now led by Gabriel Galpolo, following Campos Netos exit in December 2024.
Still, Alckmin stresses controlling inflations harsh impact on the poor.
The data reveals a divide: core inflation sits at 3.72% in January, calmer than the headline 5.06%, yet daily costs hinge on food and energy.Alckmins stance tests Galpolos leadership after recent rate hikes totaling 275 basis points.
Success could drop rates to 13%, spurring investmentor spark doubts in a shaky recovery.This move unfolds as Brazil juggles growth and price pressures, probing its leaders adaptability.
Alckmins practical pitch raises a key issue: does it tackle root causes or just shift the frame? The Central Banks response will shape Brazils economic course.