“Bolsonaro’s victory is largely priced in, so the real’s gains on Monday are likely to be limited. Focus will now probably rest on Bolsonaro’s appointments and the political course he is going to take, mainly as regards reforms,” analysts at Commerzbank said in a note. “We see the risk that the relief following the run-off will soon be followed by disillusionment. It would seem that the financial markets are very optimistic regarding the new government’s willingness to implement reforms.”
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Brazil’s economy was stuck in a recession for two years with high rates to combat inflation while developed markets like the U.S. have real rates at around half a percent even after the recent hikes. Consequently, observers believe the government may push for lower rates to stimulate growth ahead.
“I think they need to cut and cut fast,” Phil Torres, co-head of emerging markets for Aegon Asset Management, told Forbes. “Inflation is low enough. They have room to move and get this economy going again.”
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