SAO PAULO (Reuters) – Brazil’s currency was volatile in the market on Monday, opening sharply lower against the U.S. dollar after renewed criticism of interest rate levels by President Luiz Inacio Lula da Silva, but recovering after central bank intervention.

In an interview with TV Globo broadcast delayed on Sunday, the leftist leader called interest rate increases “irresponsible” and said his government would “take care of it,” hinting at potential upcoming policy changes.

Next (LON:) the central bank’s rate-setting board will include a majority of members selected by Lula, including his choice for governor.

The Brazilian real initially weakened 1% against the US dollar, continuing a piercing decline triggered by market disappointment with the government’s long-awaited spending cuts package unveiled in delayed November.

However, the losses were made up after the central bank announced a dollar spot auction, during which it sold $1.63 billion, which it also implemented on Friday. On Monday, the bank will also hold a dollar-denominated auction where repurchase agreements worth up to $3 billion will be concluded.

The currency of Latin America’s largest economy has lost almost 20% this year, ranking among the worst performers in emerging markets.

The downward trend continued despite the central bank taking steps earlier this month to accelerate the pace of monetary tightening with a 100 basis point hike, raising interest rates to 12.25% and signaling adjustment moves for the next two meetings.

“The only thing wrong with this country is that the interest rate is over 12%. There is no explanation,” Lula said in an interview after being released from hospital following emergency surgeries to treat and prevent bleeding in his head.

“Inflation is around 4%, it is fully controlled,” he added. “The irresponsible ones are those who are raising interest rates, not the federal government. But we will take care of it.”

The central bank’s hawkish move this month pointed to the negative market reception of the fiscal package as a factor worsening inflation dynamics as inflation expectations move away from the regulator’s target of 3%.

The central bank’s weekly survey of private economists continued to show higher median inflation forecasts for this year and next, even though economists now forecast interest rates to peak at 14.25% in March.

Brazil’s 12-month inflation ended at 4.87% in November, above the high end of the bank’s target range of 1.5% to 4.5%, while policymakers vowed to bring inflation back to 3%.

Lula has been a vocal critic of high interest rates and has repeatedly criticized central bank Governor Roberto Campos Neto, appointed by former right-wing President Jair Bolsonaro, since taking office for a third consecutive term in 2023.

Campos Neto’s term ends this month and he will be replaced by Lula’s nominee, Gabriel Galipolo.

Next year, Lula’s appointees will have a 7-2 majority on the bank’s nine-member rate-setting committee, up from a current minority of 4-5.