BRASILIA/SAO PAULO (Reuters) – Private sector economists in Brazil now project a more restrictive path for interest rates, with two 50-basis-point hikes expected this year and higher borrowing costs next year, a weekly central bank survey showed on Monday.
Amid a stronger-than-expected economy, policymakers raised rates by 25 basis points to 10.75% earlier this month, leaving the door open for further increases without committing to their specific size.
The survey revealed that economists now foresee twice the tightening 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 a 25 basis-point hike in January, with the rate kept at 12% through mid-year. They predict four 25 basis-point cuts from July onward, bringing the Selic to 10.75% by year-end.
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 2025 expectations.
Economists also lowered their inflation outlook for 2026 after two consecutive weeks of increases.
Still, inflation projections at 4.37% this year, 3.97% in 2025 and 3.60% in 2026 remain above the official 3% target. The 2027 forecast has been kept steady at 3.5% for over a year.
Since its latest rate decision, policymakers have emphasized their concern over inflation expectations unanchoring from the target, which they see as a critical issue.
“Prolonged above-target medium-term inflation expectations (2026-27) could contaminate and harden price-formation mechanisms and make it more costly for the central bank to deliver inflation at the 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 U.S. 5.40 5.40 5.35 5.35
dollar (year-end)
Interest rate Selic 11.75 11.50 10.75 10.50
(year-end, %)
(Reporting by Marcela Ayres and Gabriel Araujo; Editing by Jan Harvey and Angus MacSwan)
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