Itaú BBA - Brazil: Are lower interest rates the new normal?

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Brazil: Are lower interest rates the new normal?

December 11, 2018

We estimate a real neutral interest rate of 2.5% to 3%.


For the version with all charts and tables, please open the attached pdf file
 

We estimate a real neutral interest rate of 2.5% to 3%. Maintaining this level will depend on continued fiscal adjustment efforts.

The reduction relative to the neutral interest rate estimates of the last decade can be attributed to a combination of financial deepening and stricter fiscal policy.

Fiscal and quasi-fiscal incentives granted between 2009 and 2014 postponed the convergence of the real neutral interest rate to current levels.
 

Felipe Salles
Artur Manoel Passos
Alexandre Gomes da Cunha

 

For the version with all charts and tables, please open the attached pdf file



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