Brazil’s important inflation problems were cured by the 1994 Real Plan, but this monetary reform also resulted in a very high SELIC rate, the central bank’s overnight lending rate. More than 15 years after this reform and in spite of excellent economic indicators, interest rates in Brazil are still abnormally high, thus restricting credit and undermining the country’s development. The purpose of the present article is to analyze the factors at the root of such high interest rates in order to see that a central bank reform appears to be the best solution to tackle these elevated interest rates.
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