Risks for BRL remain high despite hawkish Brazilian central bank (BCB), economists at Commerzbank report.

Toing and froing about the fiscal framework is another risk factor for BRL

“The government’s criticism of the monetary policy not only constitutes a risk factor for the BRL but also makes the BCB’s job more difficult. The government’s debate about revising the inflation target is likely to have contributed to higher inflation expectations.”

“In our view the toing and froing about the fiscal framework is another risk factor for BRL. Even though the government seemed optimistic that it would convince the market with its solid household plans thanks to the fiscal framework, doubts remain. In particular since the susceptibility of the BRL regarding budget risks is likely to have increased further as a result of the recent turbulence on the global financial markets.”