BRASILIA (Reuters) -Brazilian Finance Minister Fernando Haddad said on Tuesday he expects interest rate cuts to begin in the coming months, citing a more favorable foreign exchange outlook in Latin America’s largest economy.
“I believe there will be room for rate cuts … in the coming months,” Haddad told an event hosted by J. Safra Bank.
He noted that at the start of the year he said he would not pay more than 5.70 reais per dollar, while the exchange rate now stands near 5.30. Although that level hurts government tax collection, he stressed it also brings “good news”.
“We can look ahead with more optimism about a balance between interest rates and the exchange rate,” he added.
Brazil’s central bank will announce its next policy decision on Wednesday, after halting a tightening cycle in July that had lifted the benchmark Selic rate by 450 basis points to 15%, its highest in nearly two decades.
A weekly central bank survey of more than 100 economists shows expectations that rates will hold steady through December, after policymakers signaled plans to keep borrowing costs unchanged to curb inflation, which has long exceeded the 3% target.
Haddad added that leftist President Luiz Inacio Lula da Silva will conclude his four-year term in 2026 with the lowest accumulated inflation ever recorded, projected for the first time to come in below 20%.
According to the minister, the average economic growth during Lula’s term will be close to 3% per year, with unemployment at historic lows.
He argued that these factors put Brazil in a stronger fiscal position than the one inherited from the previous government.
(Reporting by Marcela Ayres; Editing by Sharon Singleton)
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