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Economy & Business - February 2025

Cloud of inflation hangs over Lula in Brazil

Halfway through President Luiz Inácio Lula da Silva’s four-year term, the resurgence of inflation is throwing a wrench into his plan for Brazil. The idea was that a cocktail of fiscal stimulus, structural reforms such as the historic tax overhaul [EB-25-01], and other pay and pension increases would kickstart the economy and generate a virtuous cycle of growth just like the one that helped make him the country’s most popular leader ever during his first two terms (2003-2011). Instead, Lula got only momentary growth and is now faced with lasting inflation that is eroding consumer purchasing power and, in turn, forcing the central bank to slam on the brakes by raising the key lending rate.

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