Brazil Analysts See 75 Basis Points in Interest Rate Hikes by December

(Bloomberg) -- Brazil economists raised their interest rate forecasts and now see borrowing costs rising through January, adding to trader bets of a hiking cycle starting as soon as next week.

Most Read from Bloomberg

• How Americans Voted Their Way Into a Housing Crisis

• Chicago Halts Hiring as Deficit Tops $1 Billion Through 2025

• World's Second Tallest Tower Spurs Debate About Who Needs It

• UC Berkeley Gives Transfer Students a Purpose-Built Home on Campus

• The Plan for the World’s Most Ambitious Skyscraper Renovation

The benchmark Selic will hit 11.25% by December, up from the prior estimate of 10.5%, according to a weekly central bank survey published Monday. Analysts also lifted their end-2025 borrowing cost estimates to 10.25% from 10%.

Central bankers are facing high inflation and resilient activity ahead of next week’s policy decision. Governor Roberto Campos Neto has warned any rate hikes to tame above-target consumer price growth will be gradual. Analysts now see four straight quarter-point rises through January of next year, after which the monetary authority could lower borrowing costs again.

The bank has held the Selic steady at 10.5% since June, when they paused an almost year-long easing cycle. Still, price pressures barely cooled in early August, as core measures excluding energy and food picked up.

Economic growth in Latin America’s largest nation shot past all forecasts in the second quarter, the latest sign of resilience to high rates. Family consumption is getting a boost from a tight labor market and higher public spending.

Analysts in the survey lifted their 2024 economic growth forecast for the fourth straight week, to 2.68%.

As activity runs hot, traders are pricing in over 113 basis points in hikes this year starting in September. Former central bank Director Fernanda Guardado sees the monetary authority lifting rates 175 basis points by early 2025.

Analysts see consumer price increases at 4.3% by this December and 3.92% at the end of next year, both well above the 3% target. In a 12-month period aligned with the bank’s current mandate, inflation is seen at 3.93%.

Central bank Monetary Policy Director Gabriel Galipolo was nominated last month to replace Campos Neto, whose mandate ends in December. In recent public appearances Galipolo has said “all options” are on the table — including a hike — as the September rate decision nears.

--With assistance from Giovanna Serafim.

(Updates with more details from report in third paragraph)

Most Read from Bloomberg Businessweek

• Putting Olive Oil in a Squeeze Bottle Earned This Startup a Cult Following

• ‘They Have Stolen Our Business’: When You Leave Russia, Putin Sets the Terms

• Learning to Manage People by Talking to a Bot

• The Average American Eats 42 Pounds of Cheese a Year, and That Number Could Go Up

• How Local Governments Got Hooked on One Company’s Janky Software

©2024 Bloomberg L.P.