June 8, 2018
We are now at a historic low for interest rates in Brazil. Short-term rates have fallen more than long-term rates in part because we are still in recovery mode. People believe we will have more stimulus now than in two or three years. Naturally you’ll see the rates are lower in the short-term.
There are also, of course, issues of what is the neutral rate in Brazil. It has to do with the reforms and how will we be able to reduce the long-term rate with lower premiums and fewer risks over time. That is what the market is trying to anticipate. We have reduced [the short-term rates], but the market does not fully believe that the kind of short-term rates that we are seeing are also the neutral
Brazil needs to stick to reforms if it wants to maintain low inflation and low interest rates, says the head of the central bank, Ilan Goldfajn