Brazil’s finance minister expects interest to fall to ‘at least’ 12% by year-end

BRASILIA, July 26 (Reuters) – Brazil’s Finance Minister Fernando Haddad said on Wednesday that he expects the basic interest rate to fall to “at least” 12% by this year’s end, emphasizing ample scope for monetary easing.

The central bank has maintained its benchmark interest rate at a cycle-high of 13.75% since September 2022. But it has already signaled that most of its policymakers see room for a “parsimonious” rate cut at the rate-setting meeting next week.

In an interview with the news portal Metropoles, Haddad said that keeping the rates at their current level would surprise the world and could undermine the efforts of the Finance Ministry, which is dedicated to restoring fiscal balance.

Haddad refrained from answering how much the initial cut should be but said that 70% of the market currently believes in a reduction of 50 basis points.

The minister also emphasized the need to update the legislation on closed-end funds to boost revenue for the 2024 budget bill, which must be presented to lawmakers by August.

According to the minister, the government continues working with an expectation of a 2023 primary budget deficit of around 1% of gross domestic product (GDP) to bring it to zero next year.

Reporting by Marcela Ayres
Editing by Chris Reese

Our Standards: The Thomson Reuters Trust Principles.