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Coronavirus fears have created a dilemma for Brazil’s Central Bank

The Central Bank said it would stop reducing Brazil's already low benchmark interest rates, but outside pressure could cause them to go back on their promise

Coronavirus fears have created a dilemma for Brazil’s Central Bank
Photo: EBC

After the U.S. Federal Reserve slashed interest rates by 0.5 percentage points to mitigate the impacts of the coronavirus outbreak on the U.S. economy, investors immediately predicted a similar move by Brazil’s Central Bank. On March 18, when both the Fed and Brazil’s Monetary Policy Committee are set to have policy meetings, the expectation of further interest rate cuts is already dictating stock prices—but economists are unsure whether more cuts will have much of an effect on the Brazilian economy at this point.

The night after the Fed’s first emergency decision since the 2008 financial crisis, investors’ bets were strengthened...

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