Brazil Analysts Boost 2015 CPI, Cut GDP for 12th Straight Week

Brazil economists lowered their 2015 growth forecasts and raised their inflation expectations for the 12th straight week, as President Dilma Rousseff’s government tightens fiscal policy to slice the budget deficit.

Analysts raised their 2015 inflation estimate to 8.12 percent from 7.93 the prior week, according to the March 20 central bank survey of about 100 analysts published Monday. The last time inflation ended the year above 8 percent was 2003. The economists also lowered their forecast for economic growth to a decline of 0.83 percent from negative 0.78 previously.

Even with the world’s second-largest emerging market on the cusp of recession, Brazil’s monetary authority is raising rates to tame above-target inflation as the government boosts the cost of fuels and electricity. The real’s plunge to nearly a 12-year low against the dollar is also pressuring prices.

Brazil’s inflation in the 12 months through mid-February accelerated to a near-decade high of 7.9 percent from 7.36 percent a month earlier, the national statistics agency said Friday. Food, fuel and electricity price increases accounted for more than three-quarters of the monthly reading.

The central bank targets annual inflation of 4.5 percent, plus or minus two percentage points. Central bank directors have raised the benchmark interest rate four straight times to a six-year high of 12.75 percent. Economists in the survey predict the Selic rate will end the year at 13 percent.

Brazil’s real has lost 18 percent this year, more than all other major currencies tracked by Bloomberg. A weaker real boosts the cost of imports.

Confidence Sinks

Consumer confidence as measured by the Getulio Vargas Foundation fell in February to its lowest level since the foundation began computing the index nearly a decade ago. Business confidence as measured by the National Industry Confederation also hit a record low in March.

Brazil’s economy grew 0.1 percent 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 2014. The statistics agency will release fourth-quarter and full-year data on Friday. Analysts surveyed by Bloomberg forecast zero growth for the year.

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