Brazil's Haddad urges rate cuts, sees 2025 inflation on track

By Marcela Ayres

SAO PAULO, Nov 4 (Reuters) - Brazilian Finance Minister Fernando Haddad said on Tuesday that no matter how much pressure there is on the central bank to avoid cutting interest rates, borrowing costs will have to come down as they are "excessively restrictive".

Speaking at a Bloomberg event in Sao Paulo, Haddad said real interest rates of 10% "make no sense," adding that inflation will end the year within target.

The minister noted he did not know when interest rates would come down, but stressed that a reduction was necessary.

Brazil's benchmark Selic rate has been held at 15% since July, its highest level in nearly two decades.

Policymakers, who will announce their next monetary policy decision on Wednesday, have signaled rates will remain unchanged for a prolonged period to curb inflationary pressures amid a tight labor market and an economy that only recently began showing signs of cooling.

"No matter how much pressure banks put on the central bank to avoid rate cuts, they will have to fall," Haddad said.

In a separate interview with Bloomberg on Tuesday, the minister said that policymakers could at least signal when rates would start to fall, adding that borrowing costs should not be so high as to affect economic growth and the public accounts.

"I think that a correction in the Selic rate would bring everything into line with a more appropriate level of growth, fiscal policy, inflation," he said.

Brazil's inflation target is 3%, with a tolerance band of 1.5 percentage points in either direction.

In the 12 months to mid-October, inflation reached 4.94%. Market economists polled weekly by the central bank, who had been revising their forecasts downward, now expect inflation to end the year at 4.55%.

At the event, Haddad also said President Luiz Inacio Lula da Silva's administration would deliver the best fiscal result since 2015, rejecting accusations of a fiscal crisis from government critics, which he called "delusional." (Reporting by Marcela Ayres; Editing by Andrew Heavens, Alison Williams and Alistair Bell)