President Luiz Inacio Lula da Silva will nominate Gabriel Galipolo to the board of directors of Brazil’s central bank, Finance Minister Fernando Haddad told reporters Monday, sparking a selloff of local assets.
The nomination of Galipolo, Haddad’s deputy minister, to serve as monetary policy director will place an ally on the board as the leftist government continues to blast the central bank over its decision to maintain high interest rates. Lula will also tap Ailton Aquino dos Santos, a career central bank employee, to serve as director of supervision, filling another vacancy on the board.
Galipolo, whose selection needs Senate approval, is considered among Lula allies as a potential replacement for central bank chief Roberto Campos Neto when his term ends in December 2024. Dario Durigan will replace Galipolo as deputy finance minister, Haddad said.
Since taking office in January, Lula has hammered the central bank for holding Brazil’s key rate at a six-year high of 13.75%, alleging that it fails to curb inflation and instead drives unemployment. Campos Neto was tapped by former President Jair Bolsonaro, one of Lula’s biggest rivals. A onetime trader who’s well-known in financial markets, he has pledged to remain in his post until the end of his mandate.
Amid slim chances of convincing congress to back Campos Neto’s removal, the two board posts are Lula’s first opportunities to pick officials with a direct say on monetary policy. Two other board posts will open up in December.
Galipolo and dos Santos will serve four-year terms if they are approved by the Senate’s Economic Affairs Committee. The committee is preparing to consider the nominations “with urgency,” the body’s president, Vanderlan Cardoso, said before the announcement.
The central bank autonomy law establishes that, during their mandates, no board member can be fired unless authorized by senators, and only for extreme circumstances.
Policymakers led by Campos Neto have given no indication that rate cuts are imminent, instead saying “patience” and “perseverance” are needed before kicking off an easing cycle. They are battling expectations that consumer price increases will run above their targets through 2025.
Brazil’s annual inflation has eased significantly in recent months, falling back within the central bank’s tolerance range at 4.16% in early April. Still, core measures that strip out the most volatile items like food and energy are accelerating.
(Recasts with other names chosen by Lula and Haddad, market reaction thoughout)
