Former BC president sees double-digit interest rates by 2028 and links the scenario to public accounts
According to Gustavo Loyola, the fiscal imbalance and growing debt limit the scope for falling interest rates in Brazil.
BY THE X-TRADER NEWS NEWSROOM · REPORTING FROM INFOMONEY · 2 MIN
Former Central Bank president Gustavo Loyola projects double-digit interest rates by 2028 and points to the fiscal problem as the main obstacle to a firmer drop in the rate. According to InfoMoney, the statement was made in the Stock Pickers videocast, presented by Lucas Collazo.
In Loyola's assessment, the imbalance in public accounts and growing state debt put pressure on monetary policy. With the budget out of control, the Central Bank has less room to reduce interest rates, according to the former president.
Loyola also stated that the fiscal gap could have a multiplier effect on the cost of public debt, making the problem more expensive over time.
Another central point of the speech is the limit of monetary policy. According to the former president, trying to stabilize the economy only through monetary means can produce the opposite effect to that desired if there is no budgetary control.
For this newspaper, the message reinforces the defense of fiscal responsibility as a condition for falling interest rates. When the State spends more than it collects and increases its debt, interest policy begins to carry a weight that should not be its own.
What changes for the investor
If the double-digit interest projection until 2028 is confirmed, investors have reason to monitor fiscal signals along with interest indicators, since, according to Loyola, public accounts limit the rate's margin of fall. Interest-sensitive assets, such as stocks, foreign exchange and bonds, can react to this type of signal. The speech, however, is the view of a former BC president on the scenario, not a price forecast, and this text is not a recommendation to buy or sell.
Automatically translated from Portuguese.
