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Exchange Rate Policy In Brazil

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Executive Summary

The macroeconomic regime implanted in Brazil during the second administration of Fernando Henrique Cardoso, and largely maintained by his successor, is typical of those of the advanced countries. The anchor is provided by an inflation targeting regime (with a target inflation rate somewhat greater than in most advanced countries, of 4.5 percent a year, with a band around it of +/ - 2 percent). The exchange rate floats. The float is often described as free, but given the extent of recent reserve accumulation it would not qualify as a free float as understood by most economists.

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