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By Gabriel Burin
BUENOS AIRES, url shortener March 17 (Reuters) — Brazil’s central bank will dig in its heels on its hawkish stance next week by leaving the country’s benchmark interest rate at a six-year high while likely turning off hopes for any imminent policy easing, a Reuters poll predicted.
It would be the fifth consecutive meeting in which Banco Central do Brasil (BCB) keeps the Selic rate at 13.75% after stopping an aggressive hiking cycle.But domestic upside risks for inflation persist and recent trouble at some smaller U.S. banks is making the global picture more challenging.
In the statement accompanying its decision on Wednesday, the bank’s rate-setting committee, known as Copom, is set to reiterate a prudent view of Brazil’s public accounts, waiting to see the final form of a new planned fiscal framework.
All 30 economists in the poll conducted March 13-16 said they expected the Selic to stay at 13.75%, a restrictive approach President Luiz Inacio Lula da Silva has denounced as harmful for an economy that continues to slow.
«This is a moment of caution and of looking at the government’s efforts to remain mobilized towards fiscal responsibility and good management of expenses and revenues,» said Julio Hegedus, Mirae Asset chief economist.
Some analysts mentioned market turbulence over issues in the banking industry as a factor that may soften BCB’s tough stand, at a time of growing speculation the U.S.Federal Reserve could scale down its tightening push.
However, policymakers in Brazil and other emerging market economies would be reluctant to follow any potential move by the Fed to address worries that so far are limited mostly to a few smaller U.S.banks and, earlier this week, Swiss lender Credit Suisse.
BCB will likely wish to refrain from stoking inflation pressures by exacerbating this week’s fall in the Brazilian currency with any unwarranted steps, given the disconnect between the domestic economy and worries about banks abroad.
It is seen preparing the ground for a longer period of elevated rates and now most respondents asked about their views for the third quarter projected the Selic at 13.75% then, compared to 13.50% last month.
A majority of 14 of 25 economists saw no changes at least until June, compared to 11 of 25 in the final tally of a February survey.The consensus estimate for Q4 still saw a cut but the end-quarter rate was 25 basis points higher, at 12.75%.
The stringent policy is helping keep pressures on consumer prices at bay, with Brazil’s 12-month inflation rate falling to 5.60% last month from 5.77% in January.This year’s goal is 3.25%, plus/minus a margin of 1.5%.
(Other stories from the Reuters global economic poll) (Reporting and Polling by Gabriel Burin in Buenos Aires; Editing by Ross Finley and Chizu Nomiyama)