Analysts covering the Brazilian economy boosted their forecast for the benchmark interest rate as consumer prices surge.
Economists estimate the key rate will rise to 13.75 percent by the end of this year, up from last week’s forecast of 13.5 percent, according to the May 22 central bank survey of about 100 analysts published Monday. Policy makers have lifted borrowing costs in five straight meetings, to 13.25 percent.
The government is tightening its belt after years of economic-stimulus measures increased the cost of living and the public deficit without boosting growth. Policies including higher taxes and spending cuts will contribute to a contraction in gross domestic product of 1.24 percent this year, the worst since 1990, according to Monday’s survey.
Consumer prices will rise 8.37 percent in December 2015 from last year, exceeding upper limit of the target for the first time since 2003, according to the survey. Inflation will ease to 5.5 percent by the end of 2016 as the interest rate slides to 12 percent, according to the survey. Analysts last week expected borrowing costs to end 2016 at 11.75 percent.