Interest rates in Brazil are forecast to rise higher than anticipated as officials seek to rein in sharply surging inflation that is being exacerbated by the war in Ukraine.

Brazil’s central bank was already one of the world’s most hawkish, using a series of rate increases to lift its benchmark Selic interest rate from 2 per cent a year ago to 10.75 per cent last month. Economists expect the Selic to rise by a further 1 percentage point to 11.75 per cent on Wednesday, the highest level in five years.

Now a survey by Valor, a business media group, of 91 economists’ projections released this week found that the median forecast for the Selic has risen to 12.75 per cent by the end of the year, as Russia’s war in Ukraine has triggered a surge in commodities prices, particularly in oil and agricultural products. This is an increase from the previous consensus of 12.25 per cent.

“Inflation and interest rates are now expected to go higher and stay higher for longer,” said Armando Castelar, an economist at the Brazilian Institute of Economics.

“The geopolitical crisis impacts Brazilian inflation because of commodities,” said Ariane Benedito, economist at CM Capital Markets. “Fifteen per cent of the IPCA, Brazil’s main inflation indicator, is directly impacted by the increase in international prices of agricultural and energy commodities. “

Inflation in Brazil is running at about 10.5 per cent, fuelling discontent particularly among poorer citizens, who have borne the brunt of price increases. Consumer prices rose more than 1 per cent last month, above market expectations, and the issue ranks among the most important topics for voters in this year’s presidential election.

“Inflation is across the board, but we have higher pressure especially on items such as food, gas and electricity — categories that weigh more on the working classes,” said Alessandra Ribeiro, economist at the Tendências consultancy. “This is the big issue. “

Jair Bolsonaro, Brazil’s president, who trails in the polls ahead of the election in October, has attempted to tackle the issue by introducing measures including a bill to reduce taxes on diesel and jet fuel. He also said his government was studying measures to eliminate federal federal measures taxes on petrol, although critics warned that this was unlikely to help those Brazilians most affected by rising prices.

“I don’t think this reduction in taxation will help Bolsonaro’s popularity [as] I don’t believe it will affect consumers. Most will become higher profit margins for the businessmen” in the fuel supply chain, said Gabriel Leal de Barros, chief economist at Ryo Asset.

An opinion poll released this month by Ipespe, a research group, showed that Bolsonaro would lose a run-off race against the leftwing former president Luiz Inácio Lula da Silva.

Rising interest rates will add pressure on economic growth as companies and consumers eschew big purchases.

“The rises last year will impact growth this year. But the impact of the next rises in interest rates will be felt mostly next year,” said Castelar.

Even before the Ukraine crisis, most economists forecast that Brazil’s economy would grow by less than 1 per cent this year, while a handful of analysts had predicted a recession.