By Gabriel Burin

BUENOS AIRES (Reuters)

The Brazilian central bank will intensify its interest rate hikes with a significant 75 basis point increase on Dec. 11, indicating more restrictive monetary policy next year, according to a Reuters poll.

This move marks the third consecutive increase as inflation rises, following two smaller rises of 25 basis points in September and 50 basis points last month, bringing the Selic benchmark rate to 12%.

The Banco Central do Brasil (BCB)'s acceleration in rate hikes coincides with the U.S. Federal Reserve's cautious stance towards cutting rates due to potential consumer price resurgence in 2025.

A majority of analysts (31 of 40) predicted a 75 basis point hike on Dec. 11, increasing the rate from 11.25% to 12%. Five analysts forecast a more moderate 50 basis point increase, while four anticipated a steeper full percentage-point hike. The survey was conducted between Dec. 2-6.

On Monday, BCB's new chief indicated that current conditions suggest “higher interest rates for longer,” and that the bank will refrain from intervening in foreign exchange markets amid turbulence affecting imported inflation.

Brazil's consumer prices increased more than expected up to mid-November, with annual inflation at 4.77%, surpassing the central bank's 1.5%-4.5% target range.

All 25 respondents to a separate question predicted another rate rise in January, with 19 expecting a 75 basis point hike, four a 50 basis point increase, and two anticipating a full percentage point hike.

Looking forward, the Selic rate is projected to peak at 13.50% in the second quarter of next year and remain there until late 2025, with median forecasts suggesting a reduction to 13.00% thereafter.

Forecasts have become more hawkish since November, which anticipated the Selic peaking at 12% in the first quarter, followed by reductions throughout 2025.

Analysts from Deutsche Bank noted that factors such as currency depreciation, inflation expectations, unsustainable debt dynamics, and overheating in goods and labor markets necessitate real rates significantly above neutral. They emphasize an open-ended cycle contingent on foreign exchange and inflation metrics, predicting a potential rate of 14.5% at the cycle's end with risks for higher rates to linger through most of 2025.

(Reporting and polling by Gabriel Burin in Buenos Aires; Editing by Ross Finley and Alison Williams)