President Luiz Inacio Lula da Silva is now examining a proposal by Lara Resende that would place a ceiling on the Selic, the benchmark interest rate of Brazil. The prospect of a cap on the rate has sparked apprehension across financial markets, as the government’s role in monetary policy becomes a central point of concern.
The new proposal follows a period of volatility in which economists have remained split on whether the Central Bank should continue its easing cycle or pause rate cuts due to heightened fiscal risks. This uncertainty has extended to the leadership of both the bank and the Finance Ministry following Lula’s election to a fourth term.