Economy

Brazil interest rates expected to hit 7.00% by the end of the year

Expectations for 2021 Brazilian inflation and interest rates rose to new highs, with the Central Bank's benchmark Selic rate expected to hit 7.00% by the end of the year

Brazil's Central Bank: interest rates expected to hit 7.00% this year
Photo: REUTERS/Amanda Perobelli
Ler em português

Expectations for 2021 Brazilian inflation and interest rates rose to new highs, a survey of economists showed on Monday, with the Central Bank‘s benchmark Selic rate expected to hit 7.00% by the end of the year.

The median 2021 Selic forecast in the Central Bank’s weekly ‘FOCUS’ survey of over 100 economists rose from 6.75% the week before, as policymakers are seen tightening more aggressively to prevent 2022 inflation expectations running away.

READ ALSO: Brazil and Mexico: how cenbank of the two largest Latam’ economies face rising inflation

That was the third consecutive increase, indicating a growing belief that the central bank will raise the benchmark further beyond the so-called ‘neutral’ rate, widely considered to be around 6.00%-6.50% earlier than previously thought.

Next year’s median Selic forecast held steady at 7.00%, the survey showed.

The central bank has raised borrowing costs to 4.25% this year, and is expected to raise it by at least another 75 basis points on Aug. 4.

READ ALSO: Brazil’s inflation will peak in June or July, Economy Ministry official said

The FOCUS survey also showed that the median 2021 inflation forecast rose for a 16th week to 6.6% from 6.3%, significantly above the bank’s year-end goal of 3.75% and more than a percentage point above the 5.25% upper limit of its wider range.

Next year’s inflation outlook inched up to 3.8% from 3.75%, the survey showed, creeping further above the central bank’s goal of 3.50%.

The FOCUS survey showed that this year’s growth outlook held steady at 5.3%.

Get the best insights about Latin America market in your inbox