Sunday, February 16, 2020

Describe and evaluate the main macroeconomic policies used by the Essay - 3

Describe and evaluate the main macroeconomic policies used by the Government and Central Bank of Brazil over the last two years - Essay Example een undergoing a phase of sharp economic slowdown as inflation in the country has continued to slide up the scale to touch its highest level in the decade, with 12 month rolling inflation index (ICPA) clocking in at 7.70%, significantly above the country’s Central Bank target of 6.5%. It must be noticed that this is the highest inflation rate prevailing in the country even since May 2005, when the rates touched 8.05%. Brazil’s Central Bank plays with the policy of interest rate of the country in a bid to control the inflation in the country, as well as regularize the country’s currency (Media, 2015). Just recently Brazil’s Central Bank raised its interest rates for the third time in a row to touch the 12.75% level. The main motive behind the increase in the country’s discount rate was to control the rising inflation engulfing the economic spheres of the country, along with being in line with the monetary tightening stance taken by the Central Bank. A look further into the past tells us that in line with the slowdown being witnessed in the Brazilian economy, the Central Bank had cut its growth prediction for the country by a phenomenal 90 basis points to 0.7%. Essential to notice here is the fact that such low growth figures are below are generally below what other Latin American economies have forecasted, with the exception of Argentina and Venezuela. Taxation has also been a key cause of concern in the Brazilian economy. Within the time span of the last two years the government had given incentives to many industries to stimulate demand, for instance by giving tax breaks to the auto sector. However, knowing where Brazil currently stands at the moment, the current Government will have to take some non-populist measures including abandoning the incentives provided to various industries. The last two years have also seen changes in the country’s investment environment despite various efforts taken by the government and the Central Bank to control the

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