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Brazil’s inflation and interest rate prospects soar due to fuel hike

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By Marcela Ayres

BRASILIA, March 14 (Reuters) – Expectations about inflation and interest rates in Brazil have soared, a weekly central bank survey of private economists showed on Monday, after fuel costs rose due to rising prices. Oil price after the start of the war in Ukraine.

The median of the inflation forecasts for 2022 is 6.45% from 5.65% in the previous week in the last semester of the central bank’s “Focus” among more than 100 economists.

Monetary policymakers are targeting 3.5% inflation this year, with a tolerance margin of 1.5 percentage points.

As a result, private forecasts also see the central bank extending its current rate hike cycle this year, taking the benchmark Selic rate to 12.75% by the end of the year, versus 12.25% anticipated in the survey. from last week .

Brazil’s central bank has carried out one of the most aggressive rate hike cycles in the world, battling inflation that hit 10.54% in the 12 months to February.

The median forecast continues to point to a 1 percentage point rise in interest rates at this week’s meeting, which would take the Selic to 11.75%, up from a record low of 2% in March 2021.

Economists now see a 75 basis point rate hike in May, up from 50 basis points previously expected.

Last week, state oil company Petrobras announced a roughly 20% rise in fuel prices, fueling inflation expectations in Latin America’s largest economy, which relies heavily on road freight transport.

(Reporting by Marcela Ayres; Edited in Spanish by Javier López de Lérida)

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