(Bloomberg) — Brazil analysts lifted their key rate forecast for the end of next year as the biggest currency rout in emerging markets fans concerns of more persistent inflation going forward.
The benchmark Selic will hit 9.75% in December of next year, up from the prior estimate of 9.5%, according to a weekly central bank survey published on Monday. Analysts kept their rate estimates for end-2024 unchanged at 10.5%.
Policymakers led by Roberto Campos Neto unanimously held borrowing costs at 10.5% last week for the second straight meeting, saying that monetary policy will remain restrictive for the foreseeable future in an economic scenario that demands “even greater caution.” The board shifted its balance of risks to underscore upward pressures from higher inflation estimates, risks of a persistently weaker real and resilient services costs.
Brazil’s real has tumbled 15.2% year-to-date, marking the biggest drop among all emerging market currencies tracked by Bloomberg. The real has been hit by investor concerns over President Luiz Inacio Lula da Silva’s willingness to shore up public accounts as well as global risk-off sentiment.
Annual inflation topped all forecasts in early July, accelerating to 4.45% after a hike in gas prices sent transportation costs soaring. In the statement published with their last rate decision, central bankers said core price increases that exclude energy and food items also remain above their 3% target.
Analysts in the central bank survey raised their year-end inflation forecasts to 4.12% in 2024 and 3.98% in 2025.
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