Brazil Economists Cut 2012 Inflation Outlook as Growth Slows

Economists covering the Brazilian economy cut their forecast for 2012 inflation for a third straight week as the economy shows signs of cooling and raw materials costs fall on slower global growth.

Consumer prices will rise 5.2 percent next year, according to the median forecast in an Aug. 19 central bank survey of about 100 economists published today. The figure was down from a forecast of 5.23 percent the previous week.

“There’s a reassessment of global growth, with clear downside added to global demand and commodity prices,” said Gustavo Rangel, chief Brazil economist for ING Financial Markets in New York, in response to an e-mailed question. “There is also incipient evidence that the Brazilian economy is really decelerating.”

Economists expect the central bank to hold its benchmark interest rate unchanged at 12.5 percent at its August policy meeting, bringing to a close the tightening cycle that began in January. Policy makers are likely to adopt a “wait-and-see” policy, while they assess the impact of the global slowdown on Brazil, Rangel said.

The central bank will hold rates at 12.5 percent until the end of 2012, the survey found.

Slower Job Growth

Brazil’s economic activity shrank in June for the first time since December, 2008. Job growth in July was lower than all 10 forecasts in a Bloomberg survey of economists. Industrial production fell 1.6 percent in June, the second-biggest drop in output since 2008, and business confidence in the second quarter slid to its lowest level since 2009.

This year, prices as measured by the IPCA index will rise 6.28 percent, the survey found, from a forecast of 6.26 percent the previous week. The central bank targets inflation of 4.5 percent, plus or minus two percentage points.

Economists cut their forecast for 2011 economic growth to 3.84 percent, from 3.93 percent a week earlier, and held their 2012 growth forecast unchanged at 4 percent.

The yield on the interest rate futures contract maturing in January 2013, the most traded in Sao Paulo today, rose two basis points, or 0.02 percentage point, to 11.48 percent at 8:26 a.m. New York time.

Consumer prices rose 7.1 percent in the year through mid- August, from 6.75 percent the previous month, the national statistics agency said last week. Prices gained 0.27 percent from the previous month, more than the median forecast of 0.19 percent in a Bloomberg survey of 38 analysts.

Commodity prices have fallen 6.5 percent this month, according to the Standard & Poor’s GSCI Index.

To contact the reporters on this story: Matthew Bristow in Brasilia at mbristow5@bloomberg.net.

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.

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