Market perceives risk of considerable expansion of public spending, says economist

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In an interview with CNN this Thursday (24th), economist Alexandre Schwartsman assessed that the market has reacted to the PEC of the Explosion because it “realizes” that the country runs the risk of a strong expansion of public spending.

“In general, what the market perceives is that we run the risk of a considerable expansion in public spending next year”.

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For the economist, the “license to spend”, at a time when the Central Bank (BC) is trying to contain inflation, could cause the institution to raise the basic interest rate again, the Selic.

“Among other developments, we are talking, on the one hand, basically transferring practically BRL 200 billion for the population to spend. It means an impulse for total demand in the economy at the same time that the Central Bank has been raising interest rates to contain this demand. So, there is a risk, through this channel, of causing the BC to end up raising interest rates even more despite having announced the end of its tightening cycle”, he said.

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In addition, Schwartsman also said that there is no concern regarding the effectiveness of the PEC of the Burst. “The great truth is that no one is very concerned about whether [a PEC] it works or if it doesn’t. From a political point of view, whoever is proposing the action, whoever is against it, people are looking for headlines”.

Watch the full interview in the video above.

*Published by Pedro Zanatta, from CNN Brasil Business.

Source: CNN Brasil

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