Fazenda discards Lara Resende's suggestion about Selic and investors see adverse scenario

Dario Durigan, Minister of Finance, refused the suggestion to limit interest rates made by André Lara Resende. According to Estadão, he considered the idea incipient and full of flaws, at a time when the financial market is already following the matter with apprehension.

Lara Resende participated in the drafting of the Real Plan and contributed to taming hyperinflation, which gives the debate a historical weight. In a text entitled "I Accuse", published on September 28, he maintains that the Selic rate should fall to 7.5% per year, according to Exame.

The repercussion of the text grew at the end of October and the beginning of November, after the publication was passed on by Gleisi Hoffmann and by names close to Lula, who was re-elected. Money Times also reported that Lara Resende had received an invitation from Lula for a meeting at Palácio do Planalto.

Still according to Money Times, the text left investors uneasy at the beginning of November. Analysts pointed out the possibility of a sudden turn in economic conduct and an inflationary spiral, and some of his professional colleagues labeled the author as heterodox.

Among international voices, John H. Cochrane, from the Hoover Institution, at Stanford, does not fully agree with the forced reduction of interest rates and states, according to Estadão, that the proposal has no historical precedent. At the same time, he considers the author's tax revenue to be economically sophisticated. For the Examination, Cochrane considered the premises presented to be solid and admitted that the measure could make public debt cheaper, but raised objections about fiscal policy, real interest rates and exchange rates, without supporting or condemning the proposal.

What is at stake goes beyond a disagreement between economists. The discussion touches on the credibility of fiscal policy and the way the government responds to pressure for lower interest rates, in a scenario in which the Treasury has already signaled resistance to the idea.

What changes for the investor

For those who invest in the stock market, Nasdaq, interest rates and the dollar, the episode works as a thermometer for the debate over Selic. The points that the sources themselves highlight are the cost of public debt, which Cochrane sees as possible relief, the exchange rate and real interest rates, also mentioned by him, in addition to the risk of an inflationary spiral pointed out by economists. None of this indicates the direction of prices. The most prudent reading is to follow the signs from the Treasury and the development of the debate, without making decisions based solely on the article.

Automatically translated from Portuguese.