BRASILIA (Reuters) – Private economists now expect Brazil’s central bank to start cutting rates in November rather than September, a bank survey showed on Monday, after policymakers alerted last week that they were looking at holding rates longer than the market expected.
The central bank signaled in its policy decision it might hold interest rates at a six-year high for longer due to fiscal risks under new President Luiz Inacio Lula da Silva, who has criticized the policies of the independent central bank.
The weekly Focus survey of roughly 100 private economists, published by the central bank, now shows a median forecast of a 75-basis point (bps) cut in November, followed by a 50-basis point cut in December.
That would bring the benchmark interest rate to 12.5% by the end of this year, down from 13.75%, where it has stood since September 2022.
The year-end rate remains in line with prior expectations, but with a shift in the timing of the first rate cut. Last week, economists had expected a 25-basis point cut in September, followed by two more 50-basis point reductions.
The central bank’s new messaging also led economists to raise their interest rate forecast for the end of 2024 to 9.75%, from 9.5% previously, amid worsened inflation expectations.
Inflation is seen at 5.78% this year and 3.93% next year, compared to official targets of 3.25% and 3%, respectively.
(Reporting by Marcela Ayres; Editing by Arun Koyyur)