In June 2021, Gabriel Galípolo joined economist André Lara Resende for a discussion hosted by Brazilian Journalist Luís Nassif. Still far from becoming governor of Brazil’s Central Bank, Galípolo made no secret of his admiration for Lara Resende, one of the architects of the Real Plan, the stabilization program that brought Brazil’s hyperinflation under control in 1994. He said he needed to spend more time talking to him and praised his efforts to demystify economics and update concepts that no longer seemed to reflect economic reality.
Lara Resende challenged the notion of a natural rate of interest, the traditional relationship between savings and investment, and the effectiveness of conventional monetary policy. Galípolo followed the argument enthusiastically, adding his own observations and philosophical references. This was the Old Testament Galípolo. Their intellectual affinity was hardly accidental. In 2017, Galípolo and economist Luiz Gonzaga Belluzzo had published an article in Valor Econômico questioning the effects of persistently high interest rates on public debt and inflation itself.
During the 2021 conversation, Galípolo returned to the subject, arguing that reducing the Treasury’s borrowing costs could improve Brazil’s debt trajectory even in the presence of substantial primary fiscal deficits — which exclude interest payments on government debt. He also supported alternative tools for managing liquidity and emphasized the need to understand money and credit beyond traditional economic explanations. This was not merely an economist listening with interest to an unconventional interpretation of monetary policy. Galípolo was actively contributing to the argument.
Five years later, the setting could hardly be more different. As Central Bank governor, Galípolo conducts monetary policy under Brazil’s inflation-targeting framework and supports keeping interest rates restrictive as long as inflationary pressures persist. In September, the Central Bank’s rate-setting committee, known as Copom, lowered Brazil’s benchmark interest rate, the Selic, to 13.75% annually but reiterated the need for caution amid inflation expectations that remained above the official target.
The Central Bank governor now explains high interest rates in terms of the need to bring aggregate demand back into balance with supply — precisely one of the conventional monetary transmission mechanisms that Lara Resende continues to question. Galípolo’s institutional role has clearly changed, although that does not necessarily mean his intellectual convictions have disappeared.
There are important differences between the two periods. In 2021, Brazil’s economy was still struggling with the consequences of the pandemic, including high unemployment and substantial spare productive capacity. In 2026, the labor market remains tight, inflation has proved reluctant to converge toward the official target, and the Central Bank must manage expectations over which it has only indirect control.
Galípolo also acknowledges the limitations of the policies he implements. During a Senate hearing in May, he observed that the large share of floating-rate government bonds tied to the Selic means that raising interest rates increases the income received by bondholders, creating an additional complication for monetary policy transmission. The diagnosis he embraced in the past has therefore not been entirely abandoned. What appears to have changed is how far he is prepared to translate that diagnosis into actual policy. On Wednesday, November 4, the Copom is scheduled to announce its next interest-rate decision.
Against this backdrop, Lara Resende has returned with an even bolder proposal: cutting the Selic to 7.5% within 12 months, subsequently establishing a structural interest-rate range of 3% to 5.5%, and creating a council to coordinate fiscal and monetary policy. In 2022, Galípolo participated in a working group at the Brazilian Center for International Relations (CEBRI) that had already advocated closer coordination between the two policies, although there is no evidence that he has fully endorsed Lara Resende’s latest plan.
The disagreement, at least for now, is tangible. Lara Resende regards high interest rates as the principal driver of Brazil’s fiscal imbalance, while the Central Bank continues to treat restrictive monetary policy as necessary to preserve price stability. These are two different interpretations of a problem both economists know intimately.
It would be simplistic to accuse Galípolo of inconsistency. Thinking about economic policy outside government, with the full freedom of intellectual debate, is quite different from conducting it under legal, institutional, and political responsibilities. But it would be equally wasteful to assume that taking office should automatically put an end to the questions one raised before entering government. The Galípolo of 2021 appeared convinced that economics needed to reconsider its established dogmas. The Galípolo of 2026 administers those same doctrines with prudence, discipline, and a measure of conservatism.
But is there really no contradiction between the two positions? The question remains: Does the Old Testament Galípolo still believe that Brazilian monetary policy needs fundamental reform? Or has he discovered, now that he runs the Central Bank, that it is safer to uphold the financial market’s sacred doctrine than to rewrite it?
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