Debt Structure Weakens Brazil Monetary Policy Impact
Gabriel Galipolo warns that Brazil's floating-rate debt weakens rate policy. Higher borrowing costs boost bondholder income and hinder inflation control.
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Brazil central bank governor Gabriel Galipolo said 50% of sovereign debt is linked to the 14.50% Selic rate, weakening monetary policy transmission. Floating-rate bonds increase disposable income for bondholders when rates rise, counteracting efforts to cool the economy. Interest rates remain highly restrictive relative to global peers as the bank works to anchor inflation toward its 3% target.
