Brazil Analysts Raise Estimates for Inflation, Growth This Year

Brazil economists raised their forecasts for growth and inflation this year, as the central bank maintains its key interest rate at the highest level in more than two years.

Analysts boosted their 2014 gross domestic product forecast for the first time in 20 weeks to 0.28 percent, according to the Oct. 10 central bank survey of about 100 analysts published today. That compares to the previous week’s forecast of 0.24 percent growth. They also increased their estimate for inflation this year to 6.45 percent from 6.32 percent.

President Dilma Rousseff is battling above-target prices and slowing growth as she prepares for the second round of elections in two weeks. The economy entered recession in the first half of the year as investments contracted. At the same time, annual inflation has reached the highest level since October 2011.

Brazil’s economy contracted 0.6 percent in the second quarter after falling a revised 0.2 percent in the first three months of the year, the national statistics agency said on Aug. 29. The central bank on Sept. 29 cut its 2014 GDP growth estimate to 0.7 percent from its June forecast of 1.6 percent.

The International Monetary Fund said on Oct. 7 that Latin America’s biggest economy is expected to expand 0.3 percent this year, down from July’s estimate of 1.3 percent. The IMF sees Brazil growing 1.4 percent next year, compared with July’s estimate of 2 percent. The economists in the central bank survey see Brazil’s economy expanding 1 percent in 2015.

Inflation Target

Monthly inflation in September accelerated to 0.57 percent from 0.25 percent a month earlier. Annual inflation reached 6.75 percent. The central bank targets annual inflation at 4.5 percent, plus or minus two percentage points.

Brazil’s central bank on Sept. 3 kept the benchmark interest rate unchanged at 11 percent for the third straight meeting after having lifted borrowing costs by 375 basis points in the year through April. Inflation will start converging to target in 2016 if monetary conditions are maintained, policy makers said in the minutes to their Sept. 2-3 meeting.

Economists surveyed by the central bank see the Selic rate at 11 percent at the end of this year and 11.88 percent at year-end 2015, both unchanged from the previous week.

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