Brazil analysts cut their forecasts for interest rates and inflation…

Bloomberg — Analysts covering Brazil have lowered their estimates for the size of interest rates and inflation for this year and next amid growing speculation that the central bank will signal at its policy meeting on Wednesday that it will start to relax.

According to the central bank’s weekly survey of economists published on MondayAnalysts now predict Selic reference rate to 12.25% in December, versus the previous estimate of 12.5%. This is the first expected change in two months. Borrowing costs will fall to 9.50% at the end of 2024 and 9% in 2025, According to the survey.

Policymakers, led by Roberto Campos Neto, are expected to hold the benchmark interest rate steady at 13.75% on June 21, although they may signal their willingness to discuss rate cuts amid “clearer” consumer price expectations. Annual inflation continued to slow in May within its tolerance range, to 3.94%, after a slowdown in core indicators, which exclude energy and food prices. Some of the major Wall Street banks have placed their bets to start the easing cycle through September.

Most analysts estimate that the rise in consumer prices will accelerate again to 5.12% through December, to then drop to 4% in 2024 and 3.80% in 2025. The monetary authority targets inflation of 3.25% for this year and 3% for both 2024 and 2024. 2025.

A meeting is expected this month to discuss both those goals and the inflation target for 2026.

Pressure is mounting to lower borrowing costs after President Luiz Inacio Lula da Silva called current interest rates “ridiculous” and said they only increase unemployment. Key businessmen echoed his criticism.

Meanwhile, Congress is pushing ahead with a fiscal support bill that, for many Labor members, will kick-start the easing cycle.

Read more at Bloomberg.com