Concerns about the fiscal deficit put pressure on the Brazilian real and prices throughout last year. In December there was a slight slowdown.
Inflation in Brazil slowed slightly in December, although it remained above the target of the central bank of the neighboring country. Within this framework, the monetary authority plans at least two more increases in interest rates.
According to official data published this Friday, prices in Brazil increased 0.52% in the last month of the year and 4.83% in all of 2024in line with estimates but higher than the objective of 3% and 4.5% that the center had set as the top of the tolerance band.
Brazil’s Central Bank foresees more rate hikes to cool the economy
In this context, the law obliges the new governor of the Central Bank of Brazil (BCB), Gabriel Galipolo, to write a letter explaining why the goals were not met. A hot economy and investor anxiety over fiscal deficit They have stoked price pressures, wearing down consumers and damaging President Lula da Silva’s popularity.
Political leaders led by Galipolo commit to taking the necessary measures to bring inflation to its 3% objective and They have already announced plans to bring the reference interest rate to 14.25% by March.
But their efforts to contain prices are being complicated by dismay over the government’s plans to address its budget deficit. Although Lula has tried to allay those fears, A package of spending cuts unveiled in November fell well short of what the market expected.
Faced with this scenario, The Brazilian real suffered a significant devaluation In the recent past it even fell to a historic low against the dollar in December, triggering import costs.
Source: Ambito
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