Brazil Analysts See Double-Digit CPI for First Time in 12 Years

  • Inflation will remain at the upper limit of the target in 2016
  • Economists forecast central bank wil cut rates next year

Brazil analysts forecast inflation will exceed the 10 percent threshold by the end of this year for the first time in 12 years as the central bank keeps the benchmark rate on hold.

Inflation will accelerate to 10.04 percent by year-end, up from 9.99 percent a week earlier, according to the Nov. 13 central bank survey of about 100 analysts. Consumer price will increase 6.5 percent next year, at the top of the central bank’s target range of 2.5 percent to 6.5 percent.

Brazil’s economy is caught between accelerating inflation and what’s shaping up to be the longest recession since the 1931. The outlook for 2016 inflation has steadily worsened all year, as Finance Minister Joaquim Levy struggles to shepherd fiscal austerity measures through Congress.

Instead of planning to bring inflation to its 4.5 percent target by the end of next year, as had been its initial goal, the central bank now says it will reach the goal in 2017. Policy makers kept Brazil’s key rate at 14.25 percent for a second straight meeting last month.

They said that keeping interest rates on hold for a prolonged period of time is the best strategy to bring inflation back to its target. Traders expect the bank to resume interest rate increases, while analysts forecast the Selic will be reduced next year.

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