Brazil Considers Measures to Curb Inflation and Boost Popularity
Amidst rising inflation, the Brazilian government is exploring initiatives to provide affordable food items to combat the economic downturn and enhance President Luiz Inácio Lula da Silva's public image.
One proposal under consideration involves the distribution of low-cost food products through a network of stores in economically disadvantaged areas. To mitigate the potential impact on government expenditure, officials are considering subsidies or replicating the existing "Popular Pharmacy" program, where certain healthcare products are partially or fully subsidized.
As the cost of living continues to outpace the target, President Lula seeks to address the threat to his popularity. Investors anticipate the central bank raising interest rates to 15% in 2025, with inflation projected to remain above the 3% target through 2028.
Market concerns center on the potential for increased inflation and the need for the central bank to further tighten monetary policy. However, government officials attribute the recent inflation surge to adverse weather conditions and external supply shocks.
In collaboration with Maria Eloisa Capurro, Rachel Gamarski, and Giovanna Bellotti Azevedo.