Brazilian President Luiz Inácio Lula da Silva could appoint six directors to the Central Bank by the end of 2027. Two positions have been vacant since January, two more appointments may be made by February next year, and another pair of seats will open on December 31, 2027.
The potential changes have drawn attention from financial market participants because the directors sit on the Monetary Policy Committee, which sets the country’s interest-rate policy. Some investors are concerned that a new board could be more tolerant of inflation in order to speed up cuts to the benchmark Selic rate. Economists also expect renewed debate within the government about easing Brazil’s 3% inflation target, which has a tolerance band of 1.5 percentage points in either direction.
From 2028, Lula’s six appointees would make up a majority of the Central Bank’s nine-member board. The remaining members from the current group would be Central Bank chief Gabriel Galípolo and directors Gilneu Vivan and Izabela Correa, whose terms end on December 31, 2028. Depending on the profiles of the new appointees, Galípolo could find himself isolated during his final year in the role. He has faced criticism from members of Lula’s Workers’ Party and government officials over high interest rates and their effect on public debt.
The committee experienced a split in May 2024, when Galípolo and the other directors appointed by Lula supported a 0.5-percentage-point rate cut. A 5-4 majority instead backed a 0.25-point reduction, bringing the Selic to 10.5% a year. All subsequent decisions have been unanimous.
Speculation that economist André Roncaglia could be appointed has also affected market prices. Roncaglia, an executive director at the International Monetary Fund, said he was surprised by reports about a possible nomination and had not been contacted by the government’s economic team. He said it was up to Lula to make appointments and described his cooperation with Brazil’s Finance Ministry and Central Bank through his IMF work as productive.
An unnamed former Central Bank official told Folha that Roncaglia’s appointment could unsettle markets because of his past views, potentially damaging the institution’s credibility and signalling that Galípolo had been weakened. Other economists cited the importance of choosing directors committed to the inflation target as a way to support confidence in the bank.
Former Central Bank president Gustavo Loyola said the institution could become a scapegoat if the government fails to address fiscal issues and its popularity declines. He also warned that the government might choose directors more willing to accommodate inflation or consider raising the target, which he described as an admission of failure.
Former Central Bank director Sérgio Werlang offered a more moderate view. He said Lula understands that high inflation would hurt his popularity and could select directors with a moderately conservative outlook, similar to Galípolo and director Paulo Picchetti. Werlang expects the board to retain a broadly conservative profile, though not the more strongly conservative approach associated with former president Roberto Campos Neto.
The appointments will also test the government’s record on gender diversity. Correa is currently the only woman among the Central Bank’s senior leadership. Carolina Bohrer, head of the department responsible for the organization of the financial system, is said to have Galípolo’s support for a director position.
XP Investimentos chief economist Caio Megale said the government should fill the two existing vacancies promptly, warning that prolonged gaps can affect the work of a board designed to have nine directors. Two former Central Bank officials expect the vacancy in the supervision department, due to open in March, to go to a career civil servant. The current director, Aílton de Aquino, could be reappointed, although questions have been raised about the impact of the Banco Master scandal. Aquino gave evidence to federal police about the supervision that led to the liquidation of the institution.
Sources: Folha Mercado.