Brazil’s 2021 inflation seen at 4.0%, next year’s rate outlook also rises: survey

Outbreak of the coronavirus disease (COVID-19) in Sao Paulo

BRASILIA (Reuters) – Brazil’s expected inflation for 2021 rose for a ninth straight week to a new high of 4.0% in a central bank survey of economists published on Monday, while the interest rate expected at the end of 2022 rose by 50 basis points.

The average forecast for IPCA consumer price inflation at the end of this year rose from 3.9% a week ago, according to the latest weekly “FOCUS” survey of over 100 economists, rising further above the central bank’s official goal of 3.75%.

The central bank’s inflation target has a margin of error of 1.5 percentage point on either side.

A persistently weak exchange rate, strong global commodity prices and growing concerns over the government’s fiscal position are all pushing inflation expectations higher.

The FOCUS survey also showed economists raising their average end-2022 forecast for the central bank’s benchmark Selic interest rate to 5.50% from 5.00%, the highest since May last year.

The Selic is currently at a record low 2.00%, but is widely expected to rise soon, perhaps at next week’s policy meeting.

Economists also lowered their end-2021 average forecast for the real to 5.15 per dollar from 5.10 the week before, and next year’s forecast to 5.13 per dollar from 5.03.

The central bank sold over $5 billion in direct spot market intervention between Thursday Feb. 25 and Tuesday March 2 as the real slid to a four-month low beyond 5.70 per dollar.

(Reporting by Jamie McGeever; Editing by Kevin Liffey)

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