(Bloomberg) — Brazil’s central bank will be even slower to cut its benchmark interest rate from the current 13.75% level, according to a survey of economists who see inflation expectations deteriorating further through the first few years of Luiz Inacio Lula da Silva’s administration.
(Bloomberg) — Brazil’s central bank will be even slower to cut its benchmark interest rate from the current 13.75% level, according to a survey of economists who see inflation expectations deteriorating further through the first few years of Luiz Inacio Lula da Silva’s administration.
The benchmark Selic will reach 12.25% by December, up from a prior estimate of 12%, according to a weekly central bank survey published on Monday. The first poll released after Lula’s inauguration brought a fresh round of upward revisions to inflation estimates: consumer prices are now forecast to jump 5.31% this year, 3.65% in 2024 and 3.25% in 2025 — all of them above goal.
Analysts also delayed their bets for the beginning of the easing cycle to September from June.
Policymakers led by Roberto Campos Neto are “closely” watching reforms that might have an impact on Brazil’s fiscal outlook. They’ve warned against an expansion of subsidized credit and a reversal of the labor reform, saying both measures could “reduce” the power of monetary policy. After adding 11.75 percentage points to costs of borrowing, central bankers are now holding rates steady at a six-year high of 13.75%.
Read More: Lula Is Back in Brazil, Pledging Prosperity Driven by State
Lula took office Sunday promising economic inclusion and prosperity driven by state-owned companies and public banks. He’s expected to put in place a 169 billion real ($32.1 billion) spending plan this year, which is likely to boost inflation with higher paychecks to the poor and raises to the minimum wage. Tax breaks on fuel, which helped lower prices last year, will be extended for 60 days.
A new fiscal rule to replace the old spending ceiling law could be discussed as early as April, Finance Minister Fernando Haddad said in an interview with local newspaper O Globo. He also pledged to “harmonize” monetary and fiscal policy, in a speech that investors interpreted as more fiscally responsible.
(Updates third paragraph with more details from survey.)
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