Brazil Government Expects Rates To Fall By At Least 50 Basis Points, Minister Says

• The Brazilian government expects cuts of at least 50 basis points in the central bank's benchmark interest rate over the remaining three meetings this year, aiming to end 2023 with the rate below 12%, Planning Minister Simone Tebet said on Tuesday.
• The Selic rate stands at 13.25% after the central bank embarked on an easing cycle last month with a half-percentage-point reduction, marking the end of nearly a year of holding rates steady to combat high inflation. The next monetary policy decision is scheduled for Sept. 20.
• Policymakers have consistently stressed that the central bank will keep the 50 basis point rate cut pace, with eventual changes contingent on significant shifts in the inflation outlook.
• Tebet also expressed confidence in the process of eliminating the primary budget deficit in 2024, emphasizing that, in addition to the measures already put forth to achieve this goal, Finance Minister Fernando Haddad has other revenues that were not yet factored into the calculations.
• "From next year onwards, the spending control treadmill will move at the same speed as the revenue increase treadmill" to help balance public accounts, Tebet said.
• Brazil’s budget deficit is anticipated to remain wide and only narrow slightly from 7.6% of GDP in 2023 to 6.6% of GDP in 2024. While the government will likely approve reforms to increase tax intakes by end-2023, Fitch believes that modest real GDP growth and structurally high spending will limit its fiscal consolidation

(Sources: Reuters & Fitch Solutions)