BRASILIA, March 14 - Brazil's finance minister Fernando Haddad said the economy may have expanded as much as 1% in the first quarter and emphasized that full-year performance will be sensitive to the direction of interest rates.
In an interview with the local outlet Opera Mundi late on Friday, Haddad said gross domestic product between January and March likely rose 0.8% to 1% from the prior quarter. He attributed that quarter-on-quarter lift to government measures designed to expand credit and boost domestic demand under President Luiz Inacio Lula da Silva.
On the broader yearly outlook, Haddad said growth above 2% "will depend on interest rates." His comments came the same day the finance ministry’s economic policy secretariat projected 2.3% growth for the year.
Haddad said he was less worried about fiscal indicators than he was about borrowing costs, calling them a "handbrake" on activity even as he noted what he described as the "lowest cumulative inflation in four years."
He warned that recent oil-price volatility - following the U.S.-Israeli conflict with Iran and its potential inflationary effects - has complicated market assumptions about the timing of monetary easing that many had expected.
The central bank signaled in January that it was moving toward lowering the benchmark interest rate this month from its near two-decade high of 15%, a level that has been held since last July. On Friday, interest-rate futures reflected a market tilted toward a 25-basis-point cut, while also showing rising odds that the central bank could leave rates unchanged.
Before the Iran-linked conflict, markets had largely priced in a 50-basis-point reduction. The shift in expectations has been driven, according to Haddad, by oil-related price swings and the uncertainty they introduce for inflation and policy timing.
The minister’s remarks underscore a policy landscape in which recent fiscal and credit measures may be supporting short-term demand, but where the trajectory of borrowing costs remains a central determinant of medium-term growth outcomes.