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(Bloomberg) — Brazil economists raised their key rate forecast for the end of this year while also boosting their 2026 inflation estimates for the 10th straight week as domestic demand and the Iran war drive price pressures.
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The benchmark Selic will stand at 13.25% this December, up from the prior forecast of 13%, according to a weekly central bank survey of economists published on Monday. Analysts see annual inflation accelerating to 4.92% at the end of this year, above both the 4.91% prior estimate and the 3% target.
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Latin America’s largest economy has been jolted by an energy shock stemming from the Iran war. Complicating matters further for the central bank are new stimulus measures implemented by President Luiz Inacio Lula da Silva as he seeks reelection in October. Policymakers have trimmed borrowing costs to 14.5% and indicated their easing can be adjusted based on incoming data.
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Annual inflation sped up to 4.39% in April, up from 4.14% in March, the national statistics agency reported on May 12. Interest rate swaps with contracts ending in January 2029, a gauge of market sentiment about monetary policy, jumped after the figures came out.
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In recent weeks, Lula’s administration has rolled out new aid including subsidies for gasoline and diesel, as well as a program to help families renegotiate billions of reais in debt. The stimulus comes as polls show the leftist leader in a tight race with right-wing Senator Flavio Bolsonaro.
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—With assistance from Giovanna Serafim.
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