Brazil Analysts Increase 2016 Inflation Outlook on Weaker Real

  • Surveyed economists raise 2016 CPI forecast 8th week in a row
  • Expectations for Selic Key Interest Rate Rise in 2016

Brazil analysts raised their estimate for inflation next year for the eighth straight week on expectations of a weaker real in 2015.

Inflation next year will reach 5.87 percent, up from the previous estimate of 5.7 percent, according to the Sept. 25 central bank survey of about 100 analysts. The analysts predicted that the benchmark Selic rate at year-end 2016 will be 12.5 percent, up from 12.25 percent the previous week.

President Dilma Rousseff on Saturday said she was extremely concerned about companies that have debt in dollars and that the country has "sufficient reserves to avoid any problems in relation to disruptions because of the real."

Central bank President Alexandre Tombini said on Sept. 24 that the country could use its reserves to support the real and pledged to stay vigilant. Brazil’s currency previously fell to an historic low amid concern about the president’s ability to push budget cuts and tax hikes through Congress.

The central bank will ignore pressure from traders to increase borrowing costs and officials are confident that keeping interest rates on hold is sufficient to tame inflation, Tombini had said. Policy makers held Brazil’s key rate at 14.25 percent on Sept. 2 after boosting it by 3.25 points.

Analysts forecast inflation of 9.46 percent this year, up from the previous week’s estimate of 9.34 percent. The economists cut their estimates for gross domestic product to contractions of 2.8 percent this year and 1 percent in 2016.

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