Business · Markets · 2 hrs ago
Brazil's central bank is expected to pause interest rate cuts
Investors became more worried about Brazil's economic risks after President Lula was re-elected.
That shift has led many to expect the Central Bank of Brazil's rate-setting committee, known as Copom, to pause interest rate cuts on Wednesday.
The benchmark Selic rate is currently 13.75% a year.
The weaker currency, uncertainty over government finances, rising oil prices and stress in futures markets have made it harder to control inflation.
Economists say the central bank may wait to see whether changes in the exchange rate and inflation expectations last, while looking for clearer plans on public spending and debt.
A further fall in the currency could put more pressure on inflation and interest rates.
Brazil’s monetary policy committee is expected to pause its interest-rate cutting cycle on Wednesday, November 4, with the Selic rate at 13.75% a year.
The re-election of President Luiz Inácio Lula da Silva was followed by a worsening investor view of risk, adding pressure for a pause.
Currency depreciation, fiscal uncertainty, stress in futures markets and higher oil prices have made the inflation outlook more challenging.
Former central bank officials cited the pause as a chance to assess whether exchange-rate and inflation-expectation changes will last.
Government allies have described market pressure for fiscal adjustment as speculative and said spending cuts should protect social programs.
- Who
- Brazil’s monetary policy committee, the Copom, is expected to decide on interest rates.
- What
- It is expected to pause its cycle of interest-rate cuts, keeping the Selic at 13.75% a year.
- When
- Wednesday, November 4, according to the article.
- Where
- Brazil.
- Why
- Investor risk concerns, currency depreciation, fiscal uncertainty, stress in futures markets and higher oil prices have made the inflation outlook more challenging.
Market analysts and former central bank officials
Lula government allies and members of the Workers’ Party
Interest rates
Market analysts and former central bank officials
Analysts and former officials expect the Copom to pause cuts and assess the changing outlook.
Lula government allies and members of the Workers’ Party
Government allies have criticized market pressure for fiscal adjustment as speculative.
Fiscal policy
Market analysts and former central bank officials
Former officials say fiscal uncertainty and expansionary measures are complicating efforts to control inflation.
Lula government allies and members of the Workers’ Party
Government allies say any spending cuts should preserve social programs.
Investors’ perception of risk worsened, adding pressure on the Copom to pause interest-rate cuts.
The dollar rose 9.18%, its largest weekly increase in 18 years, and closed Friday at R$5.447.
The Copom is expected to decide whether to pause its rate-cutting cycle, with the Selic at 13.75% a year.
- Selic rate
- 13.75% a year
- Expected decision
- Pause the rate-cutting cycle
- Scheduled date
- Wednesday, November 4
- Dollar closing rate
- R$5.447 on Friday, October 30
- Weekly dollar rise
- 9.18%, the largest in 18 years
1 source
What people are saying
It is a very bad situation, because the Central Bank spends ammunition, affects the economy as a whole and leads to a very large increase in household and business defaults in vain.
It is as if it were giving a medicine that only had side effects, because the patient is taking another medicine that cancels out the intended effects.
to see what is going to happen