(Bloomberg) -- Brazil analysts raised their 2025 year-end interest rate forecasts for the second straight week on fears that public spending and a strong economy will keep inflation above target.
The benchmark Selic will hit 12.25% in December, 2025, up from the prior estimate of 12%, according to a weekly central bank survey of economists published Monday. Analysts also lifted their forecasts for consumer price increases at the end of next year to 4.34%, marking the sixth straight rise.
The central bank began tightening monetary policy in September in response to a hot economy and concerns that public accounts will deteriorate further under President Luiz Inacio Lula da Silva. Policymakers have warned of an extended campaign of rate hikes if inflation expectations keep worsening.
A strong labor market and high energy prices have dulled the effect of double-digit borrowing costs, with the annual inflation rate currently running at 4.76% — well above the central bank’s 3% goal.
Brazil’s currency, the real, has weakened 16% so far this year as investors wait for the government to announce its plans to curb spending. A weaker exchange rate fuels inflationary pressure by making imports more expensive.
--With assistance from Giovanna Serafim.
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