Brazil Analysts Raise Key Rate Forecasts for This Year And Next

(Bloomberg) -- Brazil analysts lifted their benchmark interest rate estimates for this year and next after the central bank changed its forward guidance and stepped up alerts on the global economic outlook.

Most Read from Bloomberg

The Selic will fall to 9.5% in December, up from the prior estimate of 9.13% and 9% the week before, according to a central bank economist survey published Tuesday. Borrowing costs will drop to 9% at end-2025, up from 8.5%.

Policymakers led by Roberto Campos Neto have reduced rates by 3 percentage points since August, to 10.75%, and signaled another half-point cut in May. Yet last week central bankers warned their guidance is data dependent, citing global uncertainties after the Federal Reserve signaled a delay to its own easing cycle.

Read More: Latin America Sees Low-Rate Dreams Crumble, Political Woes Rise

Tensions in the Middle East are also worrying policymakers, given that higher oil prices could revive consumer price pressures. Annual inflation slowed more than expected last month, though services costs have shown resilience.

Analysts at Wall Street banks like JPMorgan Chase & Co. have already revised up their Brazil interest rate estimates in light of global tensions.

Consumer prices will hit 3.73% in December and 3.6% at the end of next year, the survey also showed. Inflation estimates have been stuck above the central bank’s 3% target for several months, complicating efforts to further relax monetary policy.

Read More: Brazil Weakens Key 2025 Budget Target as Spending Rises

On top of that, investors fear President Luiz Inacio Lula da Silva will redouble efforts to spur economic through more government spending, ignoring promises to shore up public accounts. Finance Minister Fernando Haddad said last week Brazil will water down a closely-watched budget goal in 2025.

Analysts see the economy growing 2.02% in 2024, a deceleration after last year’s expansion of 2.9%.

Most Read from Bloomberg Businessweek

©2024 Bloomberg L.P.