- Selic forecast to drop only 50 basis points this year
- Three months ago, expectations were for a 200 basis-point cut
Brazil economists forecast the central bank will cut rates less aggressively this year as the bank’s board tries to rein in inflation that remains stubbornly above target.
Economists’ median forecast for the benchmark Selic at year-end rose to 13.75 percent from 13.5 percent the prior week, according to a weekly central bank survey. The Selic currently stands at 14.25 percent, its highest level in nearly 10 years. As recently as three months ago, economists were forecasting it would be cut to 12.75 percent by the end of the year.
Consumer inflation accelerated more than forecast by analysts in July as food prices jumped. The benchmark IPCA index, released last week, showed inflation is still running at nearly double the 4.5 percent official target. Economists surveyed by the central bank raised their year-end inflation forecast to 7.31 percent, from 7.20 percent previously.
The higher inflation forecast comes in spite of the currency’s strengthening in August. The real last week reached its strongest level relative to the U.S. dollar in more than a year. That didn’t change economists’ forecast for the currency to close at 3.3 reais per dollar at year-end.