Brazil Economists Increase Estimate for 2015 Benchmark Rate

Brazil economists raised their year-end 2015 interest-rate forecast, as the central bank continues to boost borrowing costs in the world’s biggest emerging market after China.

Analysts raised their forecast for the 2015 Selic to 12.50 percent from 12 percent last week, according to the Dec. 5 central bank survey of about 100 analysts published today. The economists also cut their growth estimates for this year and next.

Re-elected President Dilma Rousseff’s new economic team, which may be sworn in this week, has pledged to pursue more strict fiscal discipline to trim a budget deficit that has more than doubled during her term. The central bank increased the key Selic rate last week by 50 basis points to tame above-target consumer prices.

Annual inflation decelerated in November to 6.56 percent from 6.59 percent a month earlier. The central bank targets annual inflation of 4.5 percent, plus or minus two percentage points. Economists in the survey forecast inflation this year of 6.38 percent, down from the previous week’s estimate of 6.43 percent, and raised their forecast for price increases next year to 6.50 percent from 6.49 percent.

Brazil’s economy grew 0.1 percent, or 0.3 percent annualized, in the third quarter over the three previous months, after contracting 0.6 percent in the second quarter. The result pulled Brazil from the recession it entered in the first half of the year. Economists in the survey lowered their growth estimate for 2014 to 0.18 percent from 0.19 percent, and for next year to 0.73 percent from 0.77 percent.

The central bank on Dec. 3 raised the benchmark interest rate a half-point to 11.75 percent. Policy makers in a statement after the meeting said future rate increases will probably be conducted with “parsimony.”

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