NEW YORK — Bank of America says Brazil’s central bank hiking cycle is already in an “advanced” stage and therefore is calling its end.

In a note to investors, economist and fixed income strategist David Beker says Banco Central do Brasil, BCB, will increase its reference rate by another 100bps on the October 27 meeting, “followed by one last hike” of 75bps on December 8, to take the Selic rate from the current level of 6.25% to 8.00% by year-end.

Bank of America forecast represents a marked contrast with Morgan Stanley’s call. Earlier this week their analysts estimated Brazil’s central bank will have to increase the cost of money by another 300bps to boost the benchmark rate to 9.25% by March of next year. The analysts project that the BCB will deliver two hikes of 100bps in each of the last two meetings of the year, with the Selic rate ending the year at 8.25%. “The tightening cycle would likely then continue into 2022 at the first two meetings (February and March) with two additional 50bp hikes, bringing rates to 9.25%,” the Morgan Stanley analyst wrote in the report warning that BCB’s is facing a stagflation scenario.

BofA’s analyst also raised Brazil’s inflation forecast to 8% for year-end compared with 7.75% previously, as “inflation expectations have been rising persistently in the last months as surprises keep coming on the upside,” Beker wrote in the report dated September 29. He also boosted the 2022 inflation projection to 4% vs the previous 3.8% call.

Brazil has been dealing with high prices of electricity due to a severe drought and high prices of fuels given an increase on international oil prices. In addition to these factors, food prices have been another major driver while “services inflation, which was very mild in the beginning of the year, started accelerating in the last months,” the analyst said. “We still expect it to peak later on as there is still slack in the labor market,” he wrote noting that the national unemployment rate stands now at 14.1%.

Brazil’s 12-month inflation rate reached a five-year high of 9.68% in August, higher than expected, as a steep currency depreciation and a drought in many parts of the country pushed prices higher, Dow Jones Newswire reported last week. On September 22 Brazil’s central bank raised its reference rate Selic to 6.25% from 5.25%, while seeing another increase of similar proportion for its October 27 meeting.

Bank of America forecast GDP growth at 5.2% this year and sees 2.1% for next year. “Main downside risks are rising political noise, inputs shortages, inflation and higher rates. Main upside risks for activity is looser mobility restrictions that could drive services activity up in 2H,” according to the report.

The bank recently revised its Brazilian real (BRL) forecast to 5.1/USD from 5/USD “amid increased political noise, fiscal risk and negative flows”.