Reforms advance, but there are still challenges

The economic environment has improved in recent weeks, both in Brazil and abroad. In both cases, it was the result of a significant reduction in inflation rates, achieved despite highly favorable labor market indicators. There are growing expectations that it will be possible to get the post-pandemic inflationary escalation under control without the need for a recession.

This would make room for looser monetary policy, whether by stopping the cycle of hikes in the United States earlier or by cutting interest rates more quickly and significantly in countries like Brazil. This has translated into a weaker dollar and a drop in long interest rates, which are generally good for emerging countries.

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