Credit Suisse raises Brazil’s SELIC year-end projection from 7.25% to 8.25%

RIO DE JANEIRO, BRAZIL – With a “much less benign than the Central Bank’s” inflation scenario and after the COPOM’s more incisive wording with respect to anchoring inflation expectations, Credit Suisse raised its projection for the SELIC at the end of the year from 7.25% to 8.25%.

“We expect the monetary authority to maintain this tightening pace of 100 basis points per meeting until the end of the year, raising the SELIC to 8.25%. As we see it, the risks for inflation and the interest rate continue on an upward trend,” point out economists Solange Srour and Lucas Vilela.

In a report to clients, the economists note that the announcement “confirms a more cautious outlook in relation to inflation” by retracting the assessment that the rise in prices is temporary and emphasizing that inflation is generalized and that the current level can affect inflationary expectations.

While the Central Bank projects that inflation will close this year at 6.5% and will stand at 3.5% in 2022, Credit Suisse believes that the IPCA will close 2021 at 7.2% and will stand at 4.7% next year.

“Overall, COPOM’s decision to raise the interest rate by 100 basis points was in line with what was expected by the vast majority of market participants.”