Brazil’s New Central Bank Governor

By Marcela Ayres

BRASILIA/SAO PAULO (Reuters) – Brazil’s President Luiz Inacio Lula da Silva has appointed Gabriel Galipolo, the central bank’s monetary policy director, as the next governor, succeeding Roberto Campos Neto whose term ends in December, as announced by Finance Minister Fernando Haddad on Wednesday.

“It is a great honor, a significant responsibility, and I am very pleased,” Galipolo stated to reporters in Brasilia alongside Haddad.

Galipolo’s appointment is pending confirmation from the Senate’s economic affairs committee prior to a full Senate vote, with the aim for him to assume office in January. Haddad noted that the Senate will determine the most opportune time for Galipolo’s hearing.

A source indicated that the Senate hearing could take place on September 10, allowing for approval before the monetary policy meeting on September 17-18, thereby enhancing the importance of Galipolo’s comments as Campos Neto’s exit approaches.

Current governor Campos Neto congratulated Galipolo and stated, “The transition will be carried out as smoothly as possible, preserving the institution’s mission.”

In response to the news, the Brazilian real weakened against the U.S. dollar, and interest rate futures increased. Following this, the government will focus on finding a replacement for Galipolo as monetary policy director and upcoming nominations for regulation and institutional relations directors, which are due by the end of the year.

Galipolo, 42, is an economist with a master’s degree in political economy from the Pontifical Catholic University of Sao Paulo. His close relationship with Lula began in 2021, supported by his long-standing ties with Luiz Gonzaga Belluzzo, a key adviser to Lula.

Galipolo boasts a diverse professional history, having served as an economic adviser in the Sao Paulo state government, as CEO of investment bank Banco Fator, and as an adviser on public-private partnerships.

Recently, as monetary policy director, Galipolo has made hawkish comments, indicating a potential rate hike amidst inflation concerns, which contributed to a recovery in asset prices following the recent declines in the Brazilian real.

The current Selic benchmark interest rate is 10.5%. Galipolo’s recent shift in tone contrasts with his May stance, where he advocated for a more significant rate cut. This division raised concerns about the central bank’s tolerance of inflation with Lula’s majority on the board starting next year.

While emphasizing Lula’s respect for the rate-setting committee’s independence, Galipolo has acknowledged Campos Neto’s achievements, stating he is “taking a victory lap” at the conclusion of his term.

Campos Neto, appointed by former President Jair Bolsonaro, has faced ongoing criticism from Lula regarding high interest rates and allegations of politicization of the central bank.