📈 Different in form, not content

Good morning! Congress is expected to finally vote on Brazil’s 2025 federal budget today, finishing a task that should have been completed in December last year. Delays have hamstrung the government’s spending capabilities in the first three months of this year. 

Uncertainty increases; so do interest rates

As expected, the Brazilian Central Bank’s Monetary Policy Committee hiked the country’s benchmark interest rate by one percentage point to 14.25% — the highest since 2016, when Brazil was experiencing one of its worst recessions on record and inflation was running amok.

Guidance. Unlike previous statements, which explicitly foreshadowed rate hikes (and their magnitude), this time the bank left room for a more measured approach in future policy meetings, restricting itself to say that the next hike should be lower than one point but not committing to a number.

• The Central Bank believes that after three one-point rate hikes, it can afford to ease its approach at its next meeting, citing “incipient” signs of an economic slowdown — though some activity indicators have held up fine.

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