Brazil Economists Forecast Goldfajn to Further Reduce Selic Rate

Brazil economists forecast lower interest rates this year on the expectation incoming central bank president Ilan Goldfajn will ease monetary policy to stimulate growth.

Economists reduced their 2016 Selic forecast to 12.75 percent from 13 percent the prior week, according to the weekly Focus survey conducted May 20. They also raised their IPCA inflation forecast to 7.04 percent, from 7 percent previously.

Goldfajn was tapped last week to replace Alexandre Tombini at the central bank’s top job. He inherits a dilemma of stagflation with the economy in recession and inflation still above the ceiling of the official target range. Since Goldfajn’s nomination, the market has been bolstering bets that he will undertake additional reductions to the benchmark Selic, according to data compiled by Bloomberg.

Lowering rates may make inflation’s slowdown even bumpier. The readings for consumer price increases in both April and the month through mid-May exceeded all expectations from economists surveyed by Bloomberg.

Central bank directors in their monetary policy meeting last month decided to hold rates unchanged at 14.25 percent. The decision was unanimous, whereas prior meetings featured some bank directors voting for a rate increase.

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