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Informal political communication by executive leaders increasingly shapes public
discourse, yet its effects on asset prices are harder to isolate than those of central
bank communication. I ask whether public pressure from a head of government on a
legally independent central bank lowers or raises the interest rates that markets expect.
I identify 34 public remarks by Lula da Silva, as president elect and then president
of Brazil, about the central bank, its governor or fiscal policy from November 2022
to November 2024, each timed to the minute. Using five minute data, I find that
within ten minutes of the remarks made during trading hours the stock index fell by
13.1 basis points, the real depreciated by 8.5 basis points and interest rate futures
rose by about 2 basis points. Pressure for lower rates raised them, the opposite of
the evidence for the United States. Markets priced a risk to an autonomy two years
old and challenged in court by the president’s party, not an accommodation by the
governor: the rise was largest in the forward rate that spans the end of the governor’s
fixed term, and inflation linked bonds show that in 2022 and 2023 the rise in yields
reflected inflation compensation, not real rates. Prices moved at each comment, not
upon its later publication in the news. The response was largest in the first months after
the election, faded during 2023 and was not adverse in 2024, consistent with markets
learning that the institution would hold.