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How Brazil's Economy Is Holding Back The Real

With volatile inflation and interest rate measures in Brazil, business confidence has drastically fallen in recent years, leading to declines in the real. WisdomTree Brazilian Real (BZF) has fallen over 14% since September, as is seen in the chart below.

(click to enlarge)

Data provided by Trading View

Brazil's policymakers raised the benchmark lending rate in January to cut off growing inflation. In January, Brazil's central bank raised its lending rate to 12.25%, up from the previous month's rate of 11.75%, but in line with estimates for 12.25%. Since 2012, the benchmark rate has almost doubled from 7% to over 12% now, as is seen in the chart below. Even with higher rates, inflation is expected to continue to rise in coming months as the government will raise taxes to narrow the budget deficit.

"Policymakers started a tightening campaign in April of 2014 and raised the SELIC rate 12 times