Brazilian Private Economists Anticipate Two 50-Basis-Point Rate Hikes This Year, According to Reuters

BRASILIA/SAO PAULO – Economists in Brazil have updated their projections, now anticipating a more restrictive approach to interest rates. According to a weekly central bank survey, they expect two hikes of 50 basis points each this year, along with increased borrowing costs in the following year.

In light of stronger economic performance, policymakers raised the benchmark interest rate by 25 basis points to 10.75% earlier this month, leaving the possibility for further increases open without specifying their magnitude.

The survey indicates that economists are now predicting two rounds of rate hikes at the upcoming policy meetings in November and December, forecasting that the Selic rate will close this year at 11.75%, an increase from the 11.50% projected in the previous survey.

For 2025, the expectation is for a 25-basis-point increase in January, maintaining the rate at 12% until mid-year. Economists anticipate four cuts of 25 basis points starting in July, aiming to reduce the Selic to 10.75% by the end of the year, a revision from the earlier outlook of 10.50% for the close of next year.

The updated forecast coincides with stable inflation predictions for this year and next, breaking a trend of ten consecutive weeks of rising inflation expectations for 2024 and for two weeks regarding 2025 expectations.

Economists also revised their inflation outlook for 2026 downward after two weeks of increases.

Despite this, inflation estimates of 4.37% for this year, 3.97% for 2025, and 3.60% for 2026 still exceed the official target of 3%. The forecast for 2027 has remained unchanged at 3.5% for over a year.

Since their latest rate decision, officials have expressed concern that inflation expectations might drift away from the target, which they consider a critical matter.

Goldman Sachs economist Alberto Ramos noted, “Prolonged above-target medium-term inflation expectations (2026-27) could disturb price-formation mechanisms and complicate the central bank’s ability to achieve its inflation target.”

Below are the latest survey projections:

– IPCA inflation index: 4.37% (unchanged)
– GDP growth: 3.00% (unchanged)
– Brazilian real to U.S. dollar (year-end): 5.40 (unchanged)
– Interest rate Selic (year-end): 11.75% (up from 11.50%)