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Lula’s hopes for a higher inflation target would backfire

The suggestion by Brazil’s President Lula that the central bank’s inflation target should be raised is likely to be a bigger concern for the second half of his presidential term (2025-26) than the first half (2023-24). While Lula seems to be motivated by a desire for lower interest rates, a higher inflation target could, ultimately, raise borrowing costs, particularly at longer maturities.

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