Focus Bulletin: financial market now predicts higher interest rate rises this year

Numbers were released by the Central Bank. Market raised its projection for the Selic rate at the end of 2024 from 11.50% to 11.75% per year. Central Bank Headquarters in Brasília Raphael Ribeiro/BCB Financial market economists began to project a greater increase in the basic interest rate this year. The expectation, the result of a survey of more than 100 financial institutions last week, is contained in the “Focus” report released this Monday (30) by the Central Bank (BC). Currently, Selic is at 10.75% per year, after the first increase of Lula’s third term. The increase was 0.25 percentage points in interest this month. The market forecast now calls for two increases of 0.50 percentage points in the Selic rate at the November and December meetings of this year. Until then, analysts had been estimating an increase of 0.50 points in November and 0.25 points in December 2024. If the market projection is confirmed, the Selic will increase to 11.25% per year in November and to 11. 75% per year in December 2024. For the end of 2025, bank analysts raised their projection from 10.50% to 10.75% per year. This means that they continue to estimate an interest rate cut next year, but to a lesser extent. Klava analyzes in #JH the rise in interest rates in Brazil in a unanimous decision by Copom Inflation Market economists kept their inflation estimate for 2024 stable at 4.37%. As a result, analysts’ expectations for 2024 inflation remain above central inflation target and closer to the ceiling defined by the National Monetary Council (CMN). The central inflation target is 3% this year – and will be considered formally met if the index oscillates between 1.5% and 4.5% this year. ➡️For 2025, the inflation estimate remained at 3.97% in the last week. And, for 2026, the expectation fell from 3.62% to 3.60%. From 2025 onwards, the inflation target is 3% and will be considered met if it fluctuates between 1.5% and 4.5%. To define the basic interest rate and try to contain the rise in prices, the BC is already aiming, at this moment, at next year’s target, and also at 12 months until mid-2026. 🔎The higher the inflation, the lower the purchasing power of people, especially those who receive lower salaries. This is because the prices of products increase, without wages keeping up with this growth. Gross Domestic Product For growth in Gross Domestic Product (GDP) in 2024, the market projection remained stable at 3%. GDP is the sum of all goods and services produced in the country. The indicator serves to measure the evolution of the economy. For 2025, the financial market’s GDP forecast rose from 1.90% to 1.92%. Other estimates See below other financial market estimates, according to the BC: Dollar: the projection for the exchange rate for the end of 2024 remained at R$5.40. For the end of 2025, the estimate remained at R$5.35. Trade balance: for the trade balance balance (result of total exports minus imports), the projection continued at US$ 81 billion surplus in 2024. For 2025, the expectation for the positive balance decreased from US$ 76.3 billion to US$76.2 billion. Foreign investment: the report’s forecast for the entry of foreign direct investment into Brazil this year remained falling from US$70.8 billion to US$70.5 billion. For 2025, the inflow estimate remained stable at US$73 billion.



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