Analysts see higher rates and inflation in Brazil under Lula

The benchmark Selic rate will hit 12.25% in December, up from a previous estimate of 12%, according to a weekly central bank survey released Monday.

The first survey published after Lula’s inauguration brought with it a new round of upward revisions to inflation estimates: consumer prices are now expected to rise 5.31% this year, 3.65% in 2024 and 3.25%. % in 2025, all above the target.

Those responsible for monetary policy, headed by Roberto Campos Neto, keep an eye on “close up” the reforms that may affect the fiscal perspectives of Brazil.

They have warned against an expansion of subsidized credit and a rollback of the labor reform, stating that both measures could “reduce” the power of your hardening cycle. After adding 11.75 percentage points to borrowing costs, central bankers have now held rates steady at 13.75%, their highest level in six years.

Lula took office on Sunday promising economic inclusion and prosperity driven by state-owned companies and public banks. This year he is expected to launch a 169 billion reais (US$32.1 billion) spending plan that is likely to boost inflation with more aid for the poor and increases in the minimum wage. Fuel tax breaks, which helped drive down prices last year, will be extended for 60 days.

Finance minister Fernando Haddad declared in an interview with the local newspaper O Globo that a new fiscal rule could be discussed in April to replace the old spending limit law. He also promisedharmonize” monetary and fiscal policies, in a speech that investors interpreted as more responsible from a fiscal point of view.