Brazil’s market meltdown

Heavy FX intervention, hawkish noises from central bankers and the approval by congress of spending cuts in the past 24 hours appear to have (just about) pulled Brazil out of the throes of a currency crisis. But events over the past week underscore that there’s little political willingness to tighten fiscal policy sufficiently to put the public finances back on an even keel. Further aggressive interest rate hikes lie in store. And while the worst may be over for the real, we think it will remain weak at ~6/$.

Note: This will be the last Latin America Economics Weekly of 2024. The next Weekly will be sent on Friday 10th January 2025.