Good morning! Brazil’s Central Bank pushed the benchmark interest rate to a new all-time low. What does it mean for the economy? Brazil and the U.S. kickstart trade deal talks. More competition in the air travel business will lower fares. And earnings of some of Brazil’s major companies. Enjoy your read!
Will lower interest rates revive Brazil’s economy?
Brazil’s Central Bank lowered the Selic benchmark interest rate from 6.5 to 6% a year—the lowest ever since Brazil established an inflation target, in 1999. The bank also indicated further cuts down the line (markets foresee the rate at 5.5% by the end of 2019). Meanwhile, the U.S. Federal Reserve cut down its target range from the first time in 11 years to between 2 and 2.25%.
Why it matters. Many believe that the move could stimulate the sluggish Brazilian economy, with companies becoming more willing to invest and consumers more eager to spend, with credit becoming more affordable. However, other variables come into play, such as default rates and banking concentration. One negative impact is the possible depreciation of the Brazilian Real against the U.S. Dollar—the lower the difference between interest rates in both countries, the less attractive the Brazilian currency...