Bloomberg — Brazil analysts raised their 2022 interest rate estimates for the second straight week after the central bank pledged another big borrowing cost hike in May and signaled chances of an even longer tightening cycle.
The Selic will hit 13% at year’s end, above the prior estimate of 12.75%, according to a weekly central bank survey published on Monday. Analysts also raised their 2023 year-end borrowing cost estimates to 9% from 8.75% before.
The data was published with an hour and a half delay, which the central bank labor union attributed to their work stoppages that are part of a push for higher pay. The central bank press office declined to comment on the hold-up.
Policy makers led by Roberto Campos Neto raised rates to 11.75% last week, in a tightening cycle that has now accumulated 975 basis points since last March. With inflation forecasts persisting above target, the bank board signaled another increase of 100 basis points in May. They also highlighted the need for “serenity” to asses consumer price shocks coming from higher oil costs.
Latin America’s largest economy is battling renewed energy shocks after state-controlled oil company Petroleo Brasileiro SA hiked prices from diesel to gasoline. Congress passed legislation to cushion the blow, and Jair Bolsonaro’s government announced a series of measures to boost activity that is likely to increase just 0.5% this year.
“These measures would have no fiscal cost and it could positively impact the demand, marginally,” analysts including Ernesto Revilla chief economist for Latin America at Citigroup Inc., wrote in a research note. They expect, however, higher inflation from the measures and “a discomfort from the monetary policy stance.”
Analysts see 2022 consumer price increases at 6.59% and at 3.75% in 2023. Central bankers target inflation at 3.5% this year and 3.25% next, respectively.