The yield on Brazil’s 10-year government bond retreated to around 15.2%, down from the decade-high 15.75% reached on November 3rd, after the government’s economic team submitted a preliminary fiscal adjustment proposal to Congress. While specific measures have yet to be fully detailed, the proposal marks the first tangible move toward fiscal consolidation since President Lula’s reelection. Earlier in the month, Lula reaffirmed his administration’s commitment to fiscal responsibility alongside social priorities, responding to mounting pressure to outline adjustment measures after Brazilian assets sold off in the wake of his late-October victory. At the same time, minutes from the latest BCB policy meeting indicated that the current high interest rate levels are already weighing on economic activity, suggesting that rate cuts may become necessary to address slowing growth and rising unemployment risks.