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Part 3/7:

This latter measure caught many by surprise and raised alarm bells among analysts. The fear is that it could dampen the intended fiscal impact of the spending cuts while also exacerbating inflationary pressures, which are already a major concern as inflation expectations exceed targets. Consequently, these developments complicate the workload for Brazil's central bank, which has been in the process of increasing interest rates to combat inflation.

The Budget Deficit Dilemma