From currency wars to interest rate wars

Not content with waging a “currency war” against the rest of the world, Brazil’s government is now doing battle with its own banks over the high interest rates charged on loans to consumers and businesses. Various factors explain the high lending spreads enjoyed by Brazil’s banks, but the key point is that moral suasion by the government is unlikely to solve the problem. Instead, winning the war on interest rates will require deep (and unpopular) reforms to raise domestic savings.