By Marcela Ayres

BRASILIA (Reuters) – Economists raised their projections for Brazil’s borrowing prices on the stay of its tightening cycle after the central bank accelerated its fee hike and signaled that even with a extra aggressive fee course, inflation remains above goal.

On Thursday, futures markets furthermore began pricing in expectations that Brazil’s central bank will proceed elevating rates by July subsequent 300 and sixty five days, with the Selic benchmark fee projected to surpass 14%.

Policymakers on Wednesday raised rates by 50 foundation aspects to 11.25% and left the door originate for additional increases, underscoring that both the tempo and total scope of the tightening cycle are firmly tied to their dedication to returning inflation to kind out.

The central bank, which contains market hobby fee forecasts into its occupy projections, raised its inflation estimate for the relevant horizon to 3.6% for the 2nd quarter of 2026, exceeding the first fee goal of 3%.

This projection assumes rates peaking at 12.5% subsequent 300 and sixty five days.

When the bank’s monetary coverage committee, Copom, began elevating rates in September, it had projected inflation at 3.5% for the relevant horizon, with a decrease terminal Selic fee of 11.5%.

“This signifies two things: varied inflationary pressures are outweighing the damage of the projected monetary tightening, and the Copom’s – undisclosed – ‘flight notion’ likely envisions a terminal Selic fee above 12.5%,” XP (NASDAQ:) wrote in a repeat to clients.

XP now expects the Selic to reach 13.25% by the stay of the tightening cycle, up from a old forecast of 12%, implying four extra 50 foundation-level increases ahead.

Within the meantime, UBS BB raised its forecast for the Selic to top at 12.75% in March, up from a old forecast of 12.25% in January.

JP Morgan revised its terminal Selic fee to 13%, noting that it on the starting up anticipated a coordinated world easing to diminish alternate fee pressures, which could well presumably catch allowed Brazil’s central bank to pursue a smaller fee hike cycle than market consensus anticipated.

“On the different hand, the world atmosphere now appears extra perilous, and diminished easing in but another nation is at risk of befriend the staunch extra depreciated than we on the starting up anticipated,” it said.