Market Data 
By Marcela Ayres
BRASILIA (Reuters) -Brazilian President Luiz Inacio Lula da Silva’s nominee to lead the central bank starting next year, Gabriel Galipolo, said on Tuesday the leftist leader was emphatic and clear in guaranteeing him freedom in decision making.
Regarded as a heterodox economist with direct access to Lula, Galipolo has sought to ease market concerns about his potential for leniency on inflation if pressured by the president.
Speaking at a Senate committee hearing where a vote on his nomination will be held, he reiterated commitment to pursuing a 3% inflation target and noted that policymakers were concerned about unanchored expectations for consumer prices.
“It is up to the central bank to pursue this goal unequivocally by maintaining interest rates at a restrictive level for as long as necessary to achieve it,” he said.
Galipolo acknowledged that Brazil’s annual core inflation is on par with that of more stable countries like the U.S. but noted that Latin America’s largest economy is not decelerating, which is why disinflation should be slower and more costly.
He emphasized, nonetheless, that while current data such as inflation and labor market figures are important, the central bank’s focus is on a longer-term horizon.
“There is unanchoring (of inflation) in the relevant horizon that bothers us,” he said, referring to one of the variables economists view as indicative of a potential acceleration in the pace of intererst rate hikes.
Galipolo, along with the entire rate-setting board Copom, voted last month to kick off a tightening cycle, raising interest rates by 25 basis points to 10.75%.
Before the decision, when his nomination was already public, Lula said about policymakers, “If they need to hike interest rates, then they need to hike interest rates.”
The remark was viewed as a shift following ongoing calls for lower borrowing costs to support the economy and investment.
Brazil’s annual inflation in mid-September reached 4.12%, while expectations of private economists surveyed weekly by the central bank are for an increase of 4.38% this year, 3.97% next year and 3.60% in 2026, in all cases above the official target.
MARKET SKEPTICISM
Galipolo’s connection to Lula, with whom he traveled to Mexico last week for President Claudia Sheinbaum’s inauguration, has raised skepticism among many market participants since he was first tapped for a central bank position last year.
The economist, previously the Finance Ministry’s executive secretary under Lula, has served as the bank’s monetary policy director since July 2023.
Markets initially voiced concern about his perceived lack of technical expertise and views on issues such as the need for state intervention to prioritize social needs and the suggestion that the central bank could act across the entire yield curve.
He has since overcome initial resistance to succeed current governor Roberto Campos Neto, appointed by former right-wing President Jair Bolsonaro. Neto has faced vocal criticism from Lula since the president took office in January 2023.
Jefferson Laatus, chief strategist at the Laatus group, said market worries will not cease immediately. “We will only know for sure about it in January, at the first meeting that will actually take place with him as governor,” he said.
After committee approval, Galipolo’s name still needs to be ratified by the full Senate.
Asked about financial autonomy of the central bank, a proposal opposed by the Lula administration but supported by Campos Neto, Galipolo said the current discussion marks a “significant advance.”
