Good morning! Brazil’s Central Bank set to make the biggest increase to benchmark interest rates in 18 years. Income tax reform undergoes another round of tweaks. Congress keen on pushing through controversial changes to electoral rules.
Brazilian interest rates to rise fast
Brazil’s Central Bank is poised to make another increase to its benchmark interest rate, the only question is how high they are planning to go. Markets expect a full percentage-point increase, taking the Selic rate up to 5.25 percent in what would be the biggest bump in almost 20 years. And the upward trend is expected to continue, with the country’s main banks expecting year-end rates to reach at least 7 percent.
- The benchmark interest rate has been used as a tool to tame inflation. The 12-month consumer price inflation index IPCA reached 8.35 percent in June, well above the government’s target band.
- Low-income households are feeling a much bigger pinch, with food and energy expenses representing a larger share of their budget. Between March 2020 and 2021, food prices soared 123 percent, according to a recent survey by the Brazilian Planning and Taxation Institute.
- In São Paulo, inflation reached 1.02 percent in July alone, the highest...