All five of the central bank’s rate decisions since May have been unanimous, including December’s bigger-than-expected 100 basis-point hike that came with surprising policy guidance of planned increases of the same size in January and March of 2025. Despite the united front and hawkish rhetoric from Galipolo, who has pledged independence from Lula, some economists say the market remains unconvinced.

“The forward guidance was issued precisely because there are concerns,” said former central bank director Alexandre Schwartsman, appointed during Lula’s first term in 2003. “It’s a symptom, a recognition there are serious doubts about how (Galipolo) will behave, whether he will truly be independent or not.”

“We’ll see the true outcome after March,” he added. “Until then, the ghosts of Copom past will hold sway.”

One such phantom is that of Alexandre Tombini, the last central bank governor appointed by Lula’s leftist Workers Party. On his watch in late 2012, Copom cut rates and kept them at a record low despite inflation shooting away from the official target.

Many economists criticized Tombini for ceding to pressure from then-President Dilma Rousseff to keep borrowing costs low, adding to imbalances in Brazil’s economy that eventually tipped the country into its worse

Recession ever. Lula’s allies instead cite his relationship with Henrique Meirelles, whom he tapped to run the central bank during his first two terms from 2003 to 2010 when aggressive monetary policies eventually paved the way for a robust economic boom.

Meirelles told Reuters he was confident Lula would respect the central bank’s independence as he had in his prior terms.

“If it’s good for the country, it’s good for the government. As long as Lula trusts in this, the relations are likely to become less tense,” Meirelles said in a telephone interview, adding that investors’ biggest concern is Brazil’s surging public debt.

Brazil’s Treasury forecasts the country’s gross debt will have climbed by 10 percentage points over Lula’s term to 81.7% of GDP by 2026, considered exceptionally high among emerging-market peers.

With less than two years before the next election, aides say Lula has been especially impatient about obstacles to economic growth, including high interest rates.

Relations with Campos Neto were also soured from the start after the central bank chief voted in the 2022 election wearing a soccer jersey favored by Bolsonaro’s supporters. Adding insult to injury, he attended a dinner in his honor in June held by Sao Paulo Governor Tarcisio de Freitas, seen as one of Lula’s strongest challengers in 2026.

Campos Neto has said central bank officials can be close to political actors while maintaining their independence.

Setting aside Lula’s baggage with Campos Neto, some say his personal relationship with Galipolo, whom he has called a “gift” and “a golden boy,” may have swung too far in the other direction.

Galipolo joined Lula for bilateral meetings with foreign heads of state in Rio de Janeiro during the summit  G-20 major economies in November and tagged along with Finance Minister Fernando Haddad for meetings in Washington the month before, the kind of events from which Campos Neto was notably absent.

Still, opposition lawmakers have praised Galipolo’s qualifications and a Senate committee unanimously approved his nomination.

With economic growth around 3.5% in 2024 and record-low unemployment, tight monetary policy has faced limited public backlash. However, former central bank officials believe the real challenge for Galipolo will come when the central bank needs to maintain its position as the economy cools and unemployment rises – a more sensitive issue for a left-leaning government.