Brazil’s central bank has acted with caution due to global uncertainties as prospects for international growth remain low, President Alexandre Tombini said yesterday.
Policy makers have expressed concern over the resilience of Brazil’s inflation in recent months, Tombini said at an event in the southern Brazilian city of Porto Alegre. The central bank adjusted its communications strategy, and further actions may be necessary to rein in costs, he added.
“The focus of Brazil’s monetary policy has been and will continue exclusively to be the stability of prices,” Tombini said. “Still, due to remaining uncertainties, the central bank has acted with caution.”
President Dilma Rousseff’s government is caught between the slowest economic growth in three years and inflation levels approaching the upper limit of the central bank’s target range. While officials have kept borrowing costs at record lows and expanded tax cuts in efforts to steady an uneven recovery, accelerating annual inflation has increased pressure on the central bank to tighten monetary policy. Authorities will wait for indicators including the March consumer price report tomorrow before deciding upon their next steps, Tombini told a Senate hearing last week in Brasilia.
Consumer prices rose 6.43 percent in the 12 months through mid-March, and all but three of the 29 economists surveyed by Bloomberg estimate the March inflation data will show it broke the target range for the first time since 2011. The central bank targets inflation at 4.5 percent, plus or minus two percentage points.
After growing just 0.9 percent in 2012, recent indicators show Brazil’s economy has experienced an uneven recovery this year. While consumer default rates in February fell to the lowest levels since December 2011 and retail sales in January topped analysts’ estimates, industrial production in February contracted the most since December 2008.
Brazil’s economy will grow at a 4 percent annualized rate in the first quarter of the year, Tombini said. Investments have rebounded on improvements in growth prospects, Tombini said, adding that expenditures on agriculture machines and truck production grew in the first quarter.
Brazil’s $2.5 trillion economy will grow 3.1 percent this year, the central bank said in its latest quarterly inflation report. The country’s gross domestic product expanded 2.7 percent and 7.5 percent in 2011 and 2010, respectively.