(Bloomberg) -- Brazil analysts lifted their 2024 inflation expectations for the fourth straight week and now expect consumer prices to rise above the tolerance range as investors dial up concerns over public spending.
Consumer prices are seen increasing 4.55% in December, above last week’s estimate of 4.5%, according to a weekly central bank economist survey published on Monday. Annual inflation is expected to hit 4% at the end next year and 4.04% in a twelve-month horizon similar to the bank’s horizon.
Central bankers led by Roberto Campos Neto are warning of the impacts that higher government spending is having on efforts to slow inflation to the 3% target. As the government raises the minimum wage and expands money transfers, households tend to consume more, possibly driving up the cost of living, policymakers said during speeches in Washington DC last week. Those concerns were also behind their decision to lift rates to 10.75% last month.
Annual inflation accelerated to 4.47% in early October, just below the central bank’s 4.5% tolerance range ceiling. Residential electricity bills soared, while food and beverages also rose on the back of severe drought.
Finance Minister Fernando Haddad has stuck a more optimistic tone, saying inflation will remain within the bank’s tolerance range this year. His team will soon announce measures to shore up public accounts without the need to reformulate the country’s fiscal rules, Haddad said at a press conference while attending the International Monetary Fund’s annual meetings last week.
Investor concerns about Brazil’s public debt path are weighing on assets such as the real, which is one of the worst-performing emerging market currencies this year. Campos Neto has reiterated there’s a need for a “positive fiscal shock” to help lower borrowing costs.
Analysts in the survey kept their year-end key rate estimates steady at 11.75% for 2024 and 11.25% for 2025.
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