The decision by Brazil’s central bank to start monetary easing 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%. In practice, however, we suspect that the government would be able to push through changes to lower or even remove the floor on the Selic if warranted by a marked deterioration in the real economy.
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