Brazil To Continue Hiking Cycle Amid Market Pressure

• Fitch Solutions expects that the Banco Central do Brasil will hike its benchmark Selic target interest rate to 5.00% by the end of 2021, an upward revision from its previous forecast of 4.50%.
• Headline inflation is likely to exceed the central bank's 5.25% y-o-y upper target through end-2021 due to higher food and fuel costs as well as unfavorable base effects.
• Risks to the agency’s forecasts are to the upside, as the central bank's goal to enact a modest hiking cycle may conflict with market expectations for more aggressive hikes and lead to market volatility.

(Source: Fitch Solutions)