Donald Trump tariffs are in the limelight, affecting trade figures linked to a number of countries across the globe. It seems Brazil’s economy also needs to find a better approach to address the impacts and the high rates scenario, too.
The economy of Brazil is suggesting at early signs of stress because of the combined pressure from record-high interest rates and external stress. The benchmark Selic rate – at 15% some days back – has resulted from 7 rate hikes from the Central Bank in a series.
This economic policy has been instrumental in curbing inflation in Brazil. But it is also starting to restrain economic processes faster than expected. The pace of the monetary tightening’s effects may be faster than originally modeled, as per experts.
External pressures complicating the situation too
The Central Bank of Brazil has reaffirmed its commitment to maintaining high interest rates until the inflation rate reduces to the target number. But external pressures are also complicating the situation.
The tariffs imposed on certain Brazilian goods by the US pose a risk to key export sectors, potentially letting the economic drag to push harder. It seems trade negotiations need to happen sooner than later for things to get back to normal fast.
In parallel, fiscal authorities in Brazil are also planning a set of targeted steps to support exporters and mitigate the impact of external pressures better. This includes a proposed plan to redirect billions of dollar from the BNDES Export Guarantee Fund into subsidized credit lines.
