The Brazilian real weakened against multiple currency rivals on Friday as markets are betting that the central bank will leave interest rates unchanged next week. The real has been decimated this year, acting as one of the worst-performing currencies in the world. With an economy in shatters and the coronavirus pandemic still entrenched in the country, is the real set to retest record lows? 

A new Reuters poll of economists suggests that the rate-setting committee, Copom, will choose to hold rates steady at an all-time low of 2% at its October policy meeting. Officials are expected to point to a rebound in retail sales and industrial output, as well as the upward trend in consumer prices, for keeping interest rates on hold. 

If the forecasts are accurate, this would be the fourth consecutive month that Brazil has maintain its benchmark Selic rate. 

In the past, Brazil’s central bank president, Roberto Campos Neto, has stated that any rate hike would be linked to inflation rather than the controversial spending increase by President Jair Bolsonaro and his government. 

Last month, Bolsonaro sent financial markets reeling when he announced a new program called “Renda Cidada” that is supposed to support the economy. The problem is that his proposal breaks the so-called spending ceiling that limits government spending growth. 

This could trigger rampant price inflation and additional weakness in the real. 

The mid-month consumer price index (CPI) in Octob surged to 0.94%, more than double from the same time a month ago. 

In other data, foreign direct investment (FDI) increased to $1.6 billion in September, up from $1.43 billion in the previous month. 

The South American country continues to be hammered by COVID-19 as the nation has reported 5.32 million confirmed cases and a death toll of 156,000. 

The USD/BRL currency pair climbed 0.63% to 5.6287, from an opening of 5.5928, at 20:03 GMT on Friday. The EUR/BRL surged 0.99% to 6.6760, from an opening of 6.6100.