Good morning! This week, we look at the data to predict when Brazil’s interest rates will begin falling again. The Summit of the Americas kicks off not with a bang, but with a whimper. Brazilian society is politically split over several demographic lines.
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When is it time to lower interest rates?
Since March of last year, Brazil has undergone the world’s steepest monetary tightening process. In just over a year, the Selic benchmark interest rate has risen from 2 to 12.75 percent — with more hikes to come.
- In May, the Central Bank’s monetary policy committee said that, during next week’s meeting, it should once again increase the Selic — but at a slower pace than recent 1-point bumps.
Why it matters. A common recipe for taming inflation, higher interest rates do indeed take a heavy toll on consumers, as it restricts access to credit — a key component of Brazilian families’ budgets. Today, 77 percent of households are in debt, and their liabilities are only increasing.
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