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Good morning! Brazil's Central Bank is set to raise the benchmark interest rate by a full point to 13.25% at the end of its latest policy meeting today — its first decision under a board dominated by Lula appointees. In 2023 and 2024, the president accused a conservative Central Bank of hiking rates to appease investors and undermine his administration. Will the government respond similarly this time?

Lula hits coalition-building snag 

A cabinet reshuffle is widely expected to take place no later than March, as President Luiz Inácio Lula da Silva moves to shore up his coalition and build momentum for himself and his allies ahead of Brazil’s 2026 general election.

State of play. So far, Lula’s third term has been more about rehashed policies that largely echo his previous administrations (2003-2010), with few signature achievements. The one bright spot for the government has been a surging economy, which defied expectations in 2023 and 2024.

Yes, but … That growth has come at a cost: soaring public spending, rising debt and mounting inflation, raising questions about the sustainability of Lula’s economic approach

Snag. Lula’s governing coalition has been tenuous at best. Some parties holding multiple cabinet posts have failed to deliver the congressional support the administration expected. A cabinet reshuffle, the president hopes, could change that. 

• But selecting a new team has been fraught with complications. Several influential party leaders have already declined cabinet positions, according to sources who spoke to The Brazilian Report. 

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