Brazil Economists See Higher Key Rate as Inflation Accelerates
(Bloomberg) -- Brazil analysts raised their benchmark interest rate forecasts for this year and next even after the central bank said it will continue to deliver steep borrowing cost hikes and do all in its power to tame inflation.
The central bank will lift the benchmark Selic to 7.5% at the end of this year, above the previous estimate of 7.25%, according to a survey published on Monday. Their forecast for the interest rate in 2022 was also raised to 7.5%, the second consecutive weekly increase.
Brazil’s annual inflation hit 8.99% in July, as the most severe drought in decades pushes electricity bills up. Higher commodity prices are also pressing food staples, while services are nearing pre-pandemic levels as the economy reopens with help from a stronger vaccination campaign. Policy makers led by Roberto Campos Neto have acknowledged inflation expectations are higher than expected.
In the survey, analysts also raised their 2021 year-end consumer price forecast to 7.05%, from 6.88% previously. That was the 19th consecutive weekly increase in expectations. Estimates for 2022, which are a key focus for central bankers, were also raised to 3.9%, from 3.84% before.
The central bank targets annual inflation of 3.75% this year and 3.5% in 2022.
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