The Central Bank of Brazil’s rate setting committee will hold its final meeting of the year today.
The bank is unlikely to adjust its benchmark rate, instead choosing to continue holding it at 2% until an economic recovery is underway. Despite new inflation data breaching the upper end of the central bank’s target range—an internal precondition for raising interest rates—it was likely the renewed uncertainty wrought by surging COVID-19 cases that played a larger role in the decision making process. Debates over lockdown measures have been reignited as intensive care unit beds in Brazil’s private health care system reach 98% capacity and the country records 50,000 new cases daily.
Brazil’s finances will come under pressure early next year when a large portion of debt is due to mature—April will be the largest single month on record with $50 billion worth of debt due to mature. Treasury Secretary Bruno Funchal will likely spar with President Jair Bolsonaro over future fiscal strategies, as the president continues to explore options for financing his expanded welfare program. Barring any drastic changes, expect interest rates to remain unchanged while the government continues to borrow in short-term markets to stimulate the economy.
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