Brazil's 2021 interest rate outlook rises to 5.25pc, survey shows

BRASILIA: Brazil's 2021 interest rate outlook rose to 5.25%, a central bank survey of economists published on Monday showed, after policymakers' repeated comments that aggressive tightening now means borrowing costs will not have to rise as much in the end.

The median forecast for the benchmark Selic rate from over 100 economists in the central bank's weekly 'FOCUS' survey increased from 5.00% the week before, and 4.50% four weeks ago.

Central bank chief Roberto Campos Neto said more than once last week that front-loading rate hikes means they will not have to be increased as much, and that the bank's 'partial normalization' policy means the Selic will not get up to its neutral rate until next year.

Figures showing inflation rising above 6% in March "corroborate" another 75-basis-point interest rate rise to 3.50% in May, a repeat of the first rate hike in the tightening cycle last month, he said.

The 'FOCUS' survey on Monday also showed economists' average year-end inflation forecast inching up to 4.9% from 4.8%, even further above the central bank's goal of 3.75%.

Economists' 2022 Selic forecast was unchanged at 6.00%, and their 2023 outlook was also unchanged at 6.50%, the survey showed.

With a deadly second wave of the COVID-19 pandemic battering the country, economists' 2021 economic growth outlook for Brazil dimmed a little for the sixth week in a row to 3.1% from 3.2%. Year-end forecasts for the exchange rate also slipped for a third week to 5.37 reais per dollar from 5.35, the survey showed.