SAO PAULO (Reuters) -Brazil’s foreign money confronted a uneven market on Monday, opening sharply decrease in opposition to the U.S. greenback after renewed criticism of rate of interest ranges by President Luiz Inacio Lula da Silva however paring losses after a central financial institution intervention.

Talking in an interview with TV Globo aired late on Sunday, the leftist chief referred to as the rate of interest hikes “irresponsible” and stated his authorities would “handle that,” hinting at potential coverage modifications forward.

Subsequent (LON:) yr, the central financial institution rate-setting board may have a majority of members chosen by Lula, together with his decide for governor.

The Brazilian actual initially weakened 1% in opposition to the U.S. greenback, persevering with a steep decline triggered by market disappointment with a much-anticipated spending minimize bundle unveiled by the federal government in late November.

However losses have been trimmed after the central financial institution introduced a spot greenback public sale during which it bought $1.63 billion, a transfer it had additionally deployed on Friday. The financial institution can even maintain a dollar-denominated public sale with repurchase agreements for as much as $3 billion on Monday.

Latin America’s largest financial system has seen its foreign money lose almost 20% this yr, rating among the many worst performers in rising markets.

The downward development persevered regardless of the central financial institution’s transfer earlier this month to speed up its financial tightening tempo with a 100-basis-point hike, bringing rates of interest to 12.25%, and sign matching strikes for the subsequent two conferences.

“The one factor incorrect on this nation is the rate of interest being above 12%. There isn’t a clarification,” Lula stated within the interview after being discharged from hospital following emergency surgical procedures to deal with and stop bleeding in his head.

“Inflation is round 4%, totally managed,” he added. “The irresponsible ones are those that are mountain climbing rates of interest, not the federal authorities. However we’ll handle that.”

The central financial institution’s hawkish transfer this month cited the market’s destructive reception of the fiscal bundle as an element worsening inflation dynamics, as inflation expectations drift away from the regulator’s 3% goal.

A weekly central financial institution survey of personal economists continued to point out greater median inflation forecasts for this yr and the subsequent, regardless of economists now projecting rates of interest to peak at 14.25% in March.

Brazil’s 12-month inflation ended November at 4.87%, above the higher finish of the financial institution’s 1.5% to 4.5% goal vary, whereas policymakers have vowed to deliver inflation again to three%.

Lula has been a vocal critic of excessive rates of interest and slammed central financial institution governor Roberto Campos Neto, an appointee of former right-wing President Jair Bolsonaro, a number of occasions since taking workplace for a 3rd non-consecutive time period in 2023.

Campos Neto’s time period ends this month and he might be changed by Lula-nominated Gabriel Galipolo.

Subsequent yr Lula appointees will maintain a 7-2 majority on the financial institution’s nine-member rate-setting committee, up from the present 4-5 minority.