Lara Resende: 'Basic interest rate in Brazil causes perplexity'
"Why so high?", the economist questions in an article in the newspaper Valor Econômico; Resende states that "the very high Brazilian rates have become even more difficult to explain in light of the deep recession of the last two years," and contrasts this with richer countries, whose rates are much lower than Brazil's.
247 - Economist Lara Resende analyzes in an article in the newspaper Valor Econômico that "since the stabilization of chronic inflation with the Real - and more than 20 years have passed - the basic interest rate in Brazil has caused perplexity among analysts," and questions: "why so high?".
Resende states that "Brazil's very high rates have become even more difficult to explain in light of the deep recession of the last two years," and contrasts this with richer countries, whose rates are much lower than Brazil's.
"How is it possible that after two consecutive years of GDP decline and rising unemployment, which has already surpassed 12% of the workforce, the interest rate in Brazil remains so high, while in the developed world interest rates are exceptionally low? For almost a decade in the United States and Europe, and for three decades in Japan, interest rates have been very close to zero, or even negative, but in Brazil the nominal rate is in double digits and the real rate remains above 7% per year," writes the economist.
Lara Resende believes that Brazilian interest rates are not yet strongly influenced by a "conservative system".
"The revolutionary experience of central banks in the developed world since the great financial crisis of 2008 leaves no doubt: all macroeconomic models that adopt some version of the Quantity Theory of Money (QTM) are wrong and should be definitively retired. Central banks have increased the money supply on an unprecedented scale," says Lara Resende.