Brazil: rate cuts won’t prevent a sharp slowdown

Brazil’s monetary easing cycle will probably lead to higher spending in interest rate sensitive areas such as furniture and appliances, autos and construction materials. But that won’t be enough to prevent overall GDP growth from slowing sharply – and by more than most currently anticipate – in 2024. While lower debt servicing costs will help the government with its goal of stabilising the public debt-to-GDP ratio, that won’t get policymakers off the hook when it comes to the need for austerity.