Brazil Analysts Boost Interest-Rate Forecast to Nine-Year High

Economists raised their forecast for Brazil’s key interest rate to the highest since 2006 as they expect policy makers to continue boosting borrowing costs after this week’s meeting.

Analysts changed their forecast for the year-end benchmark rate to 14 percent from 13.75 percent, according to the May 29 central bank survey of about 100 analysts published Monday. They also increased their outlook for 2015 consumer-price increases to 8.39 percent from 8.37 percent the prior week.

Above-target inflation is forcing Brazil’s central bank to raise interest rates even as the economy heads toward recession. Analysts in Monday’s survey forecast gross domestic product will shrink 1.27 percent this year, which would be the worst performance since 1990.

Policy makers have boosted the key interest rate in five straight meetings to bring inflation to the 4.5 percent target by December 2016, to 13.25 percent. They will raise it to 13.75 percent on June 3, according to the median estimate of economists surveyed by Bloomberg.

Brazil’s economy fell 0.2 percent in the first quarter as family spending and investments dropped 1.5 percent and 1.3 percent, respectively. The statistics institute released first-quarter data the same day the central bank surveyed economists.

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