(Bloomberg) -- Brazil economists increased their interest rate and inflation estimates for next year after the government’s spending cut plan announced last week failed to ease market anxiety over fiscal policy.
The benchmark Selic will reach 12.63% in December, 2025, up from the prior estimate of 12.25%, 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 4.4%, notching their seventh straight rise.
Brazilian assets have sunk in recent days on investor disappointment with President Luiz Inacio Lula da Silva’s efforts to put public accounts in order. The selloff in the real, combined with the strong pace of economic growth, has policymakers warning that they will have to continue hiking borrowing costs to haul inflation back to the 3% target.
The central bank began its monetary tightening campaign in September to tame inflation, which in early November quickened to an annual rate of 4.77% due to factors including bad weather and growing government outlays.
Brazil’s currency, the real, has tumbled over 19% this year as investors head for the exits over the government’s widening budget deficit. A weaker exchange rate pressures the cost of living by making imports more expensive.
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