The decision earlier this week by Brazil’s central bank (BCB) to cut interest rates once again – and signal further easing ahead – has revived talk about a “floor” on interest rates in Latin America’s largest economy. At present, the minimum rate of return on popular “Poupança” savings accounts means that the benchmark Selic interest rate cannot fall much below 8% (vs. 9% currently). But in practice we doubt that this will be a binding constraint on actions by the BCB over the coming months.
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