Drop back into recession ups the pressure on Brazil policymakers

Second quarter GDP data showing that Brazil has fallen back into recession will add to pressure on the central bank to loosen policy in order to support the ailing economy. But we suspect that policy stimulus – either in the form of cuts in reserve requirements or even cuts in interest rates – would risk doing more harm than good. Instead, the key to reviving growth lies in whether the winner of October’s presidential election can implement much-needed reforms.