Brazil Analysts See Deeper Recession, Higher Interest Rates

Analysts covering the Brazilian economy forecast the central bank will raise interest rates once more this year and predict a deeper recession than previously expected.

Analysts raised their 2015 year-end interest rate forecast to 13.5 percent, up from 13.25 percent, according to the April 30 central bank survey of about 100 analysts published Monday. They forecast gross domestic product will contract 1.18 percent in 2015, compared with a 1.1 percent drop a week earlier.

Brazil’s government is struggling to navigate a slowing economy and inflation that’s at its fastest pace in more than a decade. One of the headwinds to activity are spending cuts planned by Finance Minister Joaquim Levy to stave off a sovereign credit rating downgrade.

The central bank raised interest rates for a fifth straight meeting last week to 13.25 percent, signaling it will continue to tighten monetary policy. Inflation will quicken to 8.26 percent in December, exceeding the 6.5 percent upper limit of the target for the first time since 2003, according to analysts surveyed by the central bank.

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