Business · Economy · 21 hrs ago
A gradual, credible fiscal adjustment is needed before Brazil cuts interest rates
André Lara Resende questions whether high interest rates are the best way to fight inflation and fiscal strain in Brazil.
He argues that interest payments make up most of Brazil’s nominal deficit, while the primary deficit is relatively small.
Resende also argues that persistently lower nominal rates could reduce inflation over time, but the claim lacks empirical evidence.
The commentary warns that cutting the Selic rate sharply could weaken Brazil’s currency, raise inflation expectations and push up long-term rates.
It also questions whether the government and Congress would use lower interest costs to reduce debt rather than increase spending or cut taxes.
The proposed alternative is gradual fiscal adjustment, alongside a review of the 3% inflation target and reforms to raise productivity.
The author says sustainable rate cuts require credible economic conditions and warns against reducing rates before those conditions are in place.
A gradual and credible fiscal adjustment is needed before Brazil can sustainably cut interest rates, the Estadão article argues.
The article says high interest rates can worsen Brazil’s fiscal position by raising the cost of public debt.
It warns that an aggressive cut in the Selic rate could weaken the real, raise inflation expectations and increase long-term interest rates.
The author says lower rates could be sustainable alongside a review of the 3% inflation target and structural reforms.
The article discusses economist André Lara Resende’s argument that persistently lower nominal rates could reduce inflation over the long term, but says empirical evidence is lacking.
- Who
- The article discusses economist André Lara Resende’s arguments and presents its author’s response. The author is not named in the supplied text.
- What
- The article argues that Brazil needs gradual, credible fiscal adjustment before cutting interest rates sustainably.
- When
- Published on 8 November 2026.
- Where
- Brazil.
- Why
- The article says cutting rates without the necessary economic conditions could weaken the currency, raise inflation expectations and increase risk premiums.
André Lara Resende
Estadão article author
Interest rates and inflation
André Lara Resende
Resende argues that persistently lower nominal interest rates could lead to lower inflation over the long term.
Estadão article author
The author says this possibility lacks empirical evidence and warns that cutting rates prematurely risks raising inflation expectations.
Policy approach
André Lara Resende
Resende questions whether high interest rates are the best remedy for inflation and fiscal deterioration.
Estadão article author
The author says a gradual, credible fiscal adjustment should come before sustainable rate cuts.
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- Publication date
- 8 November 2026
- Inflation target discussed
- 3%
- Monetary policy rate
- Selic
- Economist discussed
- André Lara Resende
- Proposed fiscal approach
- Gradual and credible adjustment