Citi projects Selic at 13.75% in 2026 due to worsening inflation expectations

Citi raised its projection for the Selic basic interest rate at the end of this year to 13.75%, from 13.25% estimated in April, predicting that the Central Bank will promote the last interest rate cut of 2026 at its September monetary policy meeting.

Selic is currently at 14.50%.

"The process of unanchoring inflation expectations and the intensification of the tougher tone ('hawkish') should lead the Copom to an even shorter cycle of 'calibration' of the interest rate, with the Selic ending this year at 13.75%", said the bank in a report released this Tuesday.

"New interest cuts will probably only resume in the second half of 2027." The bank estimates that the Selic will close 2027 at 11.75%.

Citi maintained its projection for the IPCA in 2026 at 4.5%, but raised the estimate for 2027 to 3.9%, from 3.7% previously projected, citing the unanchoring of inflation expectations.

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The bank argued that fuel subsidies can contain price pressures in the short term, "but do not reduce the trend of inflation above the target in the medium/long term".

Economists consulted by the BC have raised their projections for the IPCA (consumer inflation) and predict that the Selic will close the year at 13.25%, falling to 11.25% at the end of 2027, according to the most recent Focus report, released on Monday.

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Source: CNN