The central bank will raise the benchmark lending rate, the Selic, “in two stages” from a record low of 8.75%, said Ana Cristina da Costa, chief economist at the asset management unit of Brazil’s second-largest non-state bank.
Central bankers will start increasing the rate in March and take it to 10.25% by July, Costa said. They will then pause until 2011, when they will increase it at least another 2.25 percentage points and as much as 2.75 points, she said.
Costa’s prediction puts her at odds with the consensus forecast among economists. They estimate the Central Bank will cut the rate to 10.75% in 2011 after increasing it to 11% this year, according to the median forecast in a central bank survey of about 100 economists taken last week.
Costa said she expects the Central bank to raise rates slowly this year because international companies will keep flooding the country with imports, boosting competition for market share with local companies and keeping prices down.
As the global recovery picks up in 2011, foreign companies will have less excess capacity, prompting them to ship fewer goods to Brazil, she said.
Annual inflation in Brazil quickened to 4.3% in December from 4.2% in November, a government report showed Wednesday. The Brazilian government targets annual inflation of 4.5%.