Private economists in Brazil forecast two 50-basis-point rate hikes this year, by Reuters

BRASILIA/SAO PAULO (Reuters) – Brazil’s private sector economists are now projecting a tighter path for interest rates, with two 50 basis point hikes expected this year and higher borrowing costs next year, a weekly central bank survey.

Amid a stronger-than-expected economy, policymakers raised rates by 25 basis points to 10.75 percent earlier this month, leaving the door open for further hikes without committing to their specific size.

The survey showed that economists now expect to tighten twice at each of the upcoming policy meetings in November and December, with the benchmark Selic rate ending this year at 11.75%, up from 11.50% in the previous survey .

For 2025, economists expect growth of 25 basis points in January, with the rate held at 12% until mid-year. They forecast four 25 basis point cuts starting in July, taking the Selic to 10.75% by the end of the year.

Previously, the forecast was for the rate to close next year at 10.50%.

The revision came alongside unchanged inflation forecasts for this year and next, breaking a streak of ten consecutive weeks of rising expectations for 2024 and two weeks for expectations for 2025.

Economists also cut their inflation outlook for 2026 after two consecutive weeks of increases.

However, inflation forecasts of 4.37% this year, 3.97% in 2025 and 3.60% in 2026 remain above the official 3% target. The forecast for 2027 has been held constant at 3.5% for over a year.

Since the latest rate decision, policymakers have highlighted concerns about not anchoring inflation expectations to target, which they see as a critical issue.

“Prolonged medium-term inflation expectations above target (2026-27) could contaminate and strengthen price formation mechanisms and make it more costly for the central bank to deliver inflation on target,” Goldman Sachs economist Alberto Ramos said.

The following is a set of projections from the survey:

Market estimates 2024 2024 2025 2025

Median Now Previous Now Previous

week week

IPCA inflation index 4.37 4.37 3.97 3.97

(%)

GDP Growth (%) 3.00 3.00 1.92 1.90

Brazilian Real to US 5.40 5.40 5.35 5.35

dollar (year-end)

Selic interest rate 11.75 11.50 10.75 10.50

(end of year, %)