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Brazil rate outlook rises after cenbank drops forward guidance - survey

·1 min read

BRASILIA, Jan 25 (Reuters) - The outlook for Brazilian interest rates over the next two years rose to their highest in many months, a central bank survey of economists showed on Monday, following the bank's decision last week to drop its 'forward guidance' pledge to keep them low for a long time.

The average forecast of the benchmark Selic rate at the end of this year rose to 3.50% from 3.25%, and the end-2022 forecast rose to 5.00% from 4.75%, according to the latest weekly 'FOCUS' survey of around 100 economists.

The 2021 outlook is the highest since last June, and the 2022 forecast is the highest since last August.

The central bank kept the Selic rate at a record low of 2.00% last week. But against a backdrop of bubbling inflation pressures and inflation expectations converging towards target over the next two years, it ditched its forward guidance after only five months.

The FOCUS survey on Monday showed that 2021 inflation forecasts edged up to 3.50% from 3.4%, moving closer to the central bank's target of 3.75%, and next year's average forecast was unchanged at 3.50%, right on the central bank's goal for the year.

Economists expect the real's exchange rate to end this year at 5.00 per dollar, unchanged from the week before, and ending next year also at 5.00 per dollar, compared with 4.90 the prior week. It is currently trading at 5.47 per dollar. (Reporting by Jamie McGeever; Editing by Toby Chopra)