Brazilian Real: Fiscal risks weigh on currency – Commerzbank
Commerzbank’s Michael Pfister highlights that Brazil’s very high real interest rates have not prevented solid GDP growth, as expansionary fiscal policy has offset restrictive monetary conditions. With elections approaching and spending rising again, he warns that budget consolidation may be slow.
Brazilian Real's fiscal risks, driven by the government's increased spending, are influencing the currency's value, according to Commerzbank's Michael Pfister. Despite the country's high real interest rate of 14%, inflation has declined to near 4.5%, resulting in one of the world's highest real interest rates. This policy shift, coupled with budget consolidation, may take time, with the upcoming election in early October expected to impact fiscal policy more than monetary tightening.
Market participants should closely monitor fiscal data rather than monetary policy in the coming weeks, as budget consolidation post-election will likely play a more significant role in the real economy.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
