President Luiz Inacio Lula da Silva has upped his criticism of the country’s worrying interest rates, expressing his serious concern for the Brazilian economy.

In a recent interview, Lula said that high interest rates are “the only thing wrong” with Brazil’s economic framework.

His remarks were especially pertinent, coming on the heels of the central bank’s contentious decision to raise interest rates by 100 basis points, bringing them to a worrying 12.25%.

This action represents a forceful monetary policy response aimed at fighting growing inflationary pressures and alleviating market concerns about Brazil’s overall fiscal health and stability.

Lula, speaking frankly to TV Globo after successfully completing treatment and being freed from the hospital, said that inflation is effectively under control, with a current rate of roughly 4%.

He firmly identified high borrowing prices as the principal source of economic distress for the average Brazilian citizen, stating unequivocally, “There is no explanation for interest rates being above 12%.”

This bold argument highlights a major and rising gap between the Lula administration’s economic strategies and the central bank’s monetary policy.

Tightening measures by the central bank raise concerns

The central bank’s recent decision to tighten monetary policy is a direct response to the changing dynamics of inflation, which have subsequently deviated from their set aim.

The central bank disclosed that the market’s lacklustre reception of Lula’s ambitious projected fiscal package had a significant impact on worsening inflationary pressures.

Brazil’s inflation rate has risen to 4.87% over the 12 months ending in November, above the bank’s goal range of 1.5% to 4.5%.

During his discussion, Lula opposed the widespread assumption that higher interest rates are an essential tool for controlling inflation.

He slammed proponents of such rate hikes as “irresponsible,” instead pushing for a fresh commitment to total economic prudence said Lula: “If I do not control spending, if I spend more than what I have, the poorest will pay for it.”

This emphasis on fiscal accountability not only demonstrates Lula’s long-standing commitment to cautious management of Brazil’s public finances, but it also demonstrates a strong commitment to the welfare of the country’s most disadvantaged residents.

Market and currency concerns

Despite Lula’s strong comments about the importance of fiscal responsibility, market reactions show a growing tide of fear about Brazil’s future economic trajectory.

The Brazilian real has dropped to historic lows, owing mostly to persistent uncertainty about the government’s proposed spending controls.

While the administration has promised significant fiscal reforms, many opponents believe the original package fell short of appropriately addressing the urgent need to reduce increasing public debt and restore investor confidence.

Lula defended his economic policy, claiming that the measures previously proposed to Congress were the most practical and expedient solution to Brazil’s current economic issues.

“We did what was possible and sent it to Congress,” he announced, emphasizing the crucial necessity for immediate parliamentary approval to stabilize the nation’s financial environment.

A shift in the central bank’s leadership

The central bank’s leadership structure is about to undergo considerable adjustments in light of the current economic situation.

Governor Roberto Campos Neto, who was appointed during the government of former President Jair Bolsonaro, is set to be replaced this month by Gabriel Galipolo, a nominee personally chosen by Lula.

This key transfer in leadership is expected to reset the balance of power inside the central bank’s decision-making committee, moving from a 4-5 minority to a more favourable 7-2 majority aligned with Lula’s economic program.

Observers are waiting to see how Galipolo’s appointment would usher in a more accommodating monetary policy that is squarely aligned with Lula’s aspirations for economic recovery and long-term prosperity.

With two critical rate-setting sessions approaching, it is widely assumed that Lula’s nominated committee members will urge for a thorough rethinking of the dramatic rate hikes achieved by their predecessors.

Looking ahead: economic stability or stagnation?

As Brazil navigates this nuanced and convoluted economic terrain, the central bank’s next actions will be crucial.

Lula’s unwavering commitment to limiting inflation, while also condemning chronically high interest rates, represents a deeper ideological confrontation between the ideals of economic stimulus and conservative monetary policies that dominate the current debate.

The outcome of the government’s proposed fiscal package, combined with the implications of leadership changes within the central bank, will determine whether Lula can strike a harmonious balance between promoting robust economic growth and maintaining fiscal responsibility.

As Brazil prepares for imminent policy upheavals, the goal remains to achieve a united approach that supports both the country’s economic engine and its most vulnerable residents.

If Lula’s administration can successfully manage the challenges of this transition period, it has the potential to bring in a new and transformational era of economic stability and growth in Brazil.

However, the path ahead is fraught with hurdles, demanding astute governance and collaborative policymaking to achieve these lofty objectives.

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The Dominican Republic’s annual inflation rate rose slightly to 3.18% in November 2024, from 3.16% the previous month.

This reflects a recovery from the country’s lowest inflation levels since April, reflecting a complex economic landscape characterized by varying inflationary pressures across sectors.

The minor increase in the inflation rate is mostly due to increased costs in several important categories, most notably food and non-alcoholic beverages, housing and utilities, and transportation.

According to the Central Bank’s most recent data, the inflation rate for food and non-alcoholic beverages increased to 2.47%, from 2.45% in October.

Similarly, the housing and utilities sector saw price increases, rising to 1.64% from 1.52%.

Transport prices rose by 2.17%, up from 2.08% the prior month.

How price changes affect consumer spending

As consumer prices continue to fluctuate, it is critical to analyze how these variations affect household budgets and purchasing habits.

Increases in vital sectors, particularly food and housing, are critical because they account for a significant share of the average household’s expenditure.

Higher pricing in these areas may cause consumers to change their spending habits, focusing on necessities and maybe delaying discretionary purchases.

In contrast, the clothes and footwear sector experienced a slower decline in pricing, falling by 1.27% rather than 1.73% in October.

This slowdown may reflect the stability of price mechanisms in the fashion industry, indicating increased customer confidence or a shift in supply chain dynamics.

Sector-specific insights: recreation and health show a decline

Surprisingly, while some sectors experienced price increases, others saw price growth rates slow down.

The recreation and culture section saw inflation fall from 5.82% in October to 5.72% in November.

Healthcare costs also grew at a slower rate, falling from 5.26% to 5.17%.

These slower rates imply that, while some areas of consumer life become more expensive, others may stabilize or even level out.

The diverse data from various sectors reflect a complex economic environment in which inflationary pressures vary.

Global commodity pricing, local supply chain disruptions, and general consumer demand remain critical factors in defining this picture.

Monthly overview: continued price increases

Consumer prices grew by 0.16% month on month in November, a slight gain after rising by 0.09% in October.

This persistent rising trend reflects ongoing supply chain issues while global economic conditions remain fragile.

The progressive increase in monthly inflation highlights the need to attentively monitor these trends in order to anticipate potential future economic adjustments.

Such data is an important barometer for governments, corporations, and consumers alike.

Understanding these inflationary changes provides insight into both short-term and long-term economic strategies.

Navigating the path ahead

As the Dominican Republic navigates these shifting inflation rates, stakeholders must remain watchful.

Price changes in basic commodities and services spark important issues about monetary policy, wage growth, and consumer protection measures.

Balancing these economic elements will be critical to sustaining growth and keeping inflation reasonable for the average person.

With inflation currently at 3.18%, all eyes will be on economic statistics in the next months to identify trends and potential future shifts.

To address these changing financial dynamics, personal and state economic plans will need to be adjusted.

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Shares of Red Cat Holdings surged over 25% on Monday after news broke of its partnership with Palantir to integrate advanced visual navigation software into its drones.

The announcement ignited retail investor interest, with Red Cat (ticker: RCAT) becoming the sixth most discussed stock on Reddit’s WallStreetBets over the past 24 hours, trailing only names like Nvidia and Tesla.

According to data from Quiver Quantitative, RCAT’s popularity on the forum skyrocketed by 1,625%, making it a standout topic among retail traders.

At 10:29 am, the stock had given up some of the gains, and was trading more than 16%.

Broad rally lifts other drone-related stocks

The sector-wide momentum extended to other drone companies.

Unusual Machines, which has ties to Donald Trump Jr., climbed over 14%, while Kratos Defense and Security Solutions added around 4%.

By 10:30 am, Unusual Machines was trading higher by 9.6% while Kratos Defense and Security Solutions was up by 5.3%.

AeroVironment and Axon Enterprise also notched gains of more than 1%.

The surge comes amid heightened attention on drones after a series of mysterious sightings in New Jersey sparked speculation and increased scrutiny of aerial technology.

Although the FBI has stated that these sightings likely involve misidentified manned aircraft, the events have fuelled public curiosity and driven interest in drone stocks.

Policy shifts could boost US drone makers

Wall Street anticipates that the incoming administration of President-elect Donald Trump could be favourable for the drone industry.

Elon Musk, an outspoken proponent of drone technology, is expected to wield influence in shaping technology and defense policies.

Congress is also playing a role. A provision in the National Defense Authorization Act, recently passed in the House, seeks to ban China-based DJI from selling drones to US entities.

If enacted, this legislation could create opportunities for domestic manufacturers to capture market share.

“On the drone protection side, federal government counter-drone technologies are increasingly being used by local and state law enforcement to protect stadiums, airports, prisons, and other public settings,” said William Blair analyst Louie DiPalma in a note to clients.

“This will likely result in a surge in counter-drone investments by local and state government agencies over the next decade.”

The drone market has been soaring in late 2024, with the global commercial drone industry estimated to be worth $30 billion this year, according to Grand View Research.

The sector is poised for robust expansion, with an anticipated compound annual growth rate (CAGR) of 10.6% from 2025 through 2030.

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The S&P 500 and the Nasdaq Composite rose on Monday as investors waited for the outcome of the US Federal Reserve’s two-day meeting later this week. 

At the time of writing, the S&P 500 index was 0.4% higher, and the Nasdaq Composite was up 0.8% from the previous close.

The Dow Jones Industrial Average was largely flat. 

The US Fed will begin its two-meeting on Tuesday.

The market expected the US central bank to cut interest rates by 25 basis points.

“If so, that would mean the Fed has cut by 100 basis points this year, or more accurately, since September.

This is short of 150 points priced in at the beginning of the year, yet it has still provided a strong tailwind for equities in 2024,” David Morrison, senior market analyst at Trade Nation, said. 

As things stand, the Fed is forecast to cut by a further 50 basis points next year, although much depends on inflation resuming its previous downward trend.

According to the CME FedWatch tool, traders have priced in a 99.1% probability of the US central bank cutting rates by 25 bps this week. 

Super Micro Computer plunges

Shares of server maker Super Micro Computer tumbled nearly 14% on Monday. 

The fall came after a Bloomberg report claimed that the company has hired investment bank Evercore to potentially help raise equity and debt capital. 

The markets were concerned that the stock might be delisted by the Nasdaq after missing deadlines to file its quarterly and financial reports. 

CEO Charles Liang’s confidence that the stock would not be delisted seemingly did little to assuage these fears.

The company now has until February to file its outstanding reports.

Shares of Super Micro were last trading around 28% higher for the year.

Broadcom Inc surges

Shares of the chipmaker continued to surge on Monday.

Monday’s rise added to gains from last week that helped the stock to hit over $1 trillion market capitalisation for the first time ever. 

Broadcom’s rise comes after the company reported an increase in artificial intelligence-related revenue on Friday, on the heels of better-than-expected earnings results. 

Meanwhile, shares of tech companies such as Apple, Tesla and Google-parent Alphabet all traded higher. 

Shares of NVIDIA Corporation, however, fell 2% on Monday. 

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Gold prices were little changed on Tuesday as investors cautiously anticipated further cues from the policy meeting outcome of the US Federal Reserve. 

Prices have traded in a narrow range this week, with expectations of another interest rate cut by the US central bank. 

“Gold price holds the previous rebound above $2,650 early Tuesday as buyers remain in control amid sustained weakness in the US Dollar (USD) and sluggish US Treasury bond yields,” Dhwani Mehta, analyst at FXstreet, said in a report. 

According to Mehta, the focus will be on the US retail sales data later on Tuesday as the US Fed begins its policy meeting. 

At the time of writing, the February gold contract on COMEX was at $2,666.80 per ounce, down 0.1% from the previous close. 

Gold prices: Fed rate cut priced in

According to the CME FedWatch tool, traders have priced in a 95.4% probability of the US central bank cutting rates by 25 basis points.

The central bank had already cut interest by 75 bps over September and November. 

Experts had earlier expected the central bank to cut rates by 150 bps this year. However, if the December rate cut is realized, the Fed would have cut interest rates by 100 bps. 

Similarly, analysts expect the Fed to reduce rates twice in 2025. 

Carsten Fritsch, commodity analyst at Commerzbank AG, said in a report:

A Fed rate cut of 25 basis points on Wednesday next week is now fully priced in.

Concerns over Fed pausing rate-cutting cycle

There are growing concerns that the US central bank may slow down its rate-cutting cycle in 2025. 

The concerns stem from the fact that inflation in the US has remained sticky and the labor market resilient. 

“Growing expectations that the Fed could opt for fewer rate cuts in 2025 and likely pause its easing cycle in January act as a headwind to the Gold price turnaround,” Mehta said. 

Markets eagerly await the Fed’s quarterly economic projections and Chairman Jerome Powell’s comments to gauge the US central bank’s path forward on interest rates next year, which could significantly impact the gold price. 

Moreover, US President-elect Donald Trump’s expansionary economic policies and tax cuts could also prompt the Fed to slow down its monetary policy easing. 

Trump’s proposed tax cuts and tariffs on imported goods are expected to raise domestic prices, feeding into higher inflation. 

Technical analysis for gold prices

“One thing is for sure: $2,720 is the next big hurdle for gold, while $2,600 is support. The next two weeks will show whether it has enough momentum to rally into the holiday season, or if investors have other things on their mind,” David Morrison, senior market analyst at Trade Nation, said. 

According to Mehta, the 14-day relative strength index was trading flat around the 50 level, which suggested a lack of clear directional bias. 

“Gold buyers must scale the 50-day SMA at $2,671 to offer extra legs to the recent rebound. The next upside target is at the $2,700 level,” Mehta said. 

If gold prices can scale above the $2,700 per ounce level once again, the yellow metal could rise around $2,726 an ounce. 

According to Commerzbank, gold could rise briefly if there is another cut in interest rates this week. But, the German bank does not see the rise in prices to continue into next year. 

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