The Central Bank of Brazil is expected to raise its key rate again on Wednesday by 0.5 points, to 13.75%, according to analysts who predict an imminent end to the cycle of increases that began a year and a half ago in an attempt to curb the ‘inflation.
The decision will be announced after the meeting of the Central Bank’s Monetary Policy Committee (Copom), which opened on Tuesday.
If the forecasts are confirmed, it will be the twelfth consecutive increase in the key rate, which was at its historic low of 2% in March 2021, before being raised successively in the face of rising prices.
A 0.5 point increase on Wednesday, expected by most economists consulted by the economic daily Valor, would bring the key rate back to its November 2016 level.
Inflation, which increased with the war in Ukraine, continues to accelerate in Brazil: in June, it amounted to 11.89% over one year.
Analysts consulted for the Central Bank’s weekly Focus survey expect inflation to reach 7.15% in 2022, well above the upper range of the government’s target (5%).
Rising food and fuel prices that are eroding Brazilians’ purchasing power are also a source of concern for far-right President Jair Bolsonaro, who is seeking re-election in October.
He is currently far behind in the polls by the left-wing ex-president Luiz Inacio Lula da Silva (2003-2010).
The Central Bank has gradually reduced the scale of its successive increases in the key rate, the main tool in the fight against inflation.
At the last Copom meeting, in June, it had already been raised by 0.5 point, after two increases of 1 point (in March and May) and three of 1.5 points (October, December and February).
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Wednesday’s rise could be the last of the year, but some analysts believe the rate could end 2022 at 14% or more, depending on inflation.
The deterioration in the situation justifies at least two new key rate hikes. The Copom should raise it to 13.75% on Wednesday and indicate a further increase for its next meeting in August, according to the analysis of the online bank C6 Bank, which expects a rate of 14.25% at the end of the year. .
A high key rate is seen by some as a brake on recovery after the coronavirus crisis: it is a level which inhibits economic activity, deplores Marcelo Azevedo, of the National Confederation of Industries (CNI).
Other countries have raised their rates to cope with inflation. In the United States, the Fed announced last week a fourth consecutive increase in its key rates, now between 2.25% and 2.50%.