During an interview to finance newspaper Valor, JPMorgan’s chief economist in Brazil said that a 14-percent benchmark interest rate (up from the current 11.75 percent) would not be outside the realm of possibility. Cassiana Fernandez, however, added that this is not the most likely scenario.
In Ms. Fernandez’s view, the Central Bank will have to take the rate up to 13.25 percent by year-end if it wants to meet its 3.5 percent inflation target. The 12-month IPCA consumer price index currently sits at 11.3 percent, a 19-year high.
Since March 2021, Brazil has undergone the world’s steepest monetary tightening process, with the Selic benchmark interest rate jumping from 2 to 11.75 percent. Next year, the government foresees a “gradual pullback,” according to an excerpt included in the economic outlook of next year’s budget guidelines bill.
This estimate considers that a series of shocks that led to the current inflation rate will dissipate, including climate issues that affected Brazil’s food production, and external factors.
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