Photographer: Dado Galdieri/Bloomberg

Brazil Economists Forecast Fewer Interest Rate Cuts in 2016

  • Analysts raise 2016 inflation call for the sixth straight week
  • Economists hold their GDP forecasts for this year and next

Brazil economists expect fewer interest rate reductions this year as they continue to foresee faster inflation.

They forecast the Selic will end the year at 13.25 percent from its current level of 14.25 percent, according to a central bank survey for the week ending June 24. In the prior period, they expected the rate to fall to 13 percent. They also increased their year-end inflation forecast for the sixth straight week to 7.29 percent, from 7.25 percent previously, shrugging off the latest inflation data that came in below all forecasts.

The market is keeping watch on Brazil’s new central bank chief, Ilan Goldfajn, for any sign as to when the monetary authority might begin reducing borrowing costs. Inflation remains above target, and Goldfajn will preside over his first monetary policy meeting next month. On Tuesday the central bank will also release its quarterly inflation report, which analysts expect will shed some light on Goldfajn’s monetary policy plans.

Brazil’s consumer prices in the month through mid-June rose 0.4 percent, below all economists’ forecasts and the slowest since September. That positive reading followed a slew of surprises to the upside that had prompted the market to trim bets for rate cuts.

Analysts in the weekly survey held their GDP outlook for a 3.44 percent contraction this year and 1 percent growth next year.

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