Brazil’s economic policy response to the pandemic was unusually aggressive by emerging market standards. The monetary easing was perhaps the most forceful in EM when you consider the current level of the policy rate of 2%, relative to the ten-year historical average of 10%. The persistent FX sell-off has been the primary side-effect of that easing, which is, arguably a minor concern in the current low-inflation environment.
Much more consequential has been the fiscal stimulus enacted, especially the household income transfers to help offset wage income lost to Covid-19 movement restrictions.
By Gustavo Rangel via Think.ING