Brazil could lower reserve requirements

The Brazilian government is reportedly considering reducing reserve requirements for banks in an effort to inject more cash into the sluggish economy.

The central bank is considering making a reserve requirement reduction by the end of this year, according to O Globo newspaper, citing unnamed sources.

A central bank spokesperson declined to comment on the report when contacted by BNamericas.

The reduction of reserve requirements is a common mechanism adopted by Brazilian governments as a way to stimulate the economy.

Earlier this year, the central bank reduced the reserve requirement for deposit-taking institutions to 25% from 40% of deposits.

The economy was initially expected to grow around 3% this year but expectations have fallen to around 1.5% due to the great uncertainty surrounding the presidential elections in October, weak GDP growth in Q1, a 10-day truckers strike in May, and deteriorating business and consumer confidence.

High unemployment and high levels of debt are also factors keeping many Brazilians from taking out new loans.