The Brazilian real has hit a record low, making it one of the weakest currencies in the world relative to the US dollar. The crisis is largely driven by a massive increase in budget deficits, which have risen from 5% of GDP last year to 9.5% as of October.
Brazil’s central bank has intervened four times this week to stabilize the currency, after hiking interest rates for the third time in an effort to control inflation. President Luiz Inácio Lula da Silva’s administration is facing pressure to cut deficits and address the economic challenges.
Meanwhile, in Washington, House Speaker Mike Johnson’s efforts to retain his position have been undermined by his reliance on an unenforceable promise regarding the debt ceiling. This move has raised concerns among Republicans, who are skeptical of Johnson’s ability to pass legislation. With President-elect Trump likely to need Democratic votes to raise the debt limit, Johnson faces a tough fight ahead.
The situation highlights the challenges facing Brazil and the US, with both countries struggling with fiscal messes and economic instability. As the crisis in Brazil continues to unfold, it will be crucial to monitor the developments and their potential impact on global markets.
Source: https://www.axios.com/2024/12/19/brazil-real-crisis-dollar-lula