Economists raised their forecast for Brazil’s interest rate to more than 15%.

By Marcela Ayres

BRASILIA (Reuters) – Economists have started a new wave of upward revisions to Brazil’s interest rate forecasts this year, citing worsening inflation, a weak currency and concerns about the fiscal outlook for Latin America’s largest economy.

Citi Tuesday forecast rates to reach 15.50% in June, following similar moves by Itau, XP and Santander.

“Although we believe most of the currency depreciation is fiscal (policy)-related, we still expect Brazil’s central bank to respond as inflation worsens,” Citigroup said in a report; This is expected to ease only next year.

On Monday, ETAO raised its forecast for the rate of inflation to 15.75% by mid-year from 15% and expected it to remain at that level until 2025.

“If there is another round of devaluation and/or further deterioration expected, the consolidation cycle could be extended, eventually delaying devaluation in 2026,” the bank warned.

Earlier this month, XPS raised its rate forecast to 15.50% this year, underscoring growing challenges as inflation continues to run higher than the 3% target.

In December, Santander did the same, also predicting that Celik would end up at 15.50% in 2025.

These adjustments have intensified since late last year after the administration of leftist President Luiz Inacio Lula da Silva announced a fiscal austerity package that disappointed markets, weakening the currency and raising interest rate futures.

The damage continued despite the central bank’s decision in December to accelerate tightening with a 100 basis-point hike.

Inflation 2024 closed at 4.83%, above the 4.5% tolerance band. The central bank’s weekly economists are constantly raising their forecasts, and now this year consumer prices will increase by 5.08% and next year by 4.10%.

(Reporting by Marcela Ayres; Editing by Andrea Ricci)