Brazil's economist raise their 2015 key rate forecast for first time in three months in effort to slow inflation; policymakers will raise Selic to 12.25% next year, up from previous week's forecast of 12%, according to May 2 central bank survey

, May 5, 2014 () – Brazil economists raised their 2015 key rate forecast for the first time in three months, as officials in the world’s second-largest emerging market pledge to slow inflation.

Brazil’s policy makers will lift the Selic to 12.25 percent next year, compared with the previous week’s forecast of 12 percent, according to the May 2 central bank survey of about 100 analysts published today. That’s the highest level since the bank started publishing 2015 estimates.

President Dilma Rousseff’s administration is facing the dual challenge of above-target inflation and slowing economic growth. While policy makers have lifted the key rate 375 basis points in the past year, annual inflation in April accelerated at the fastest pace since last June, according to a Bloomberg forecast. Rousseff on April 30 announced more government support for the poor as consumer confidence in the same month dropped to the lowest level in nearly five years.

Annual inflation in April accelerated to 6.42 percent from 6.15 percent the month prior, according to the median estimate from 21 economists surveyed by Bloomberg. The national statistics agency will publish the official inflation figure on May 9.

Brazil’s inflation pressure has diminished, and consumer prices will slow in May and June, Finance Minister Guido Mantega said in Brasilia on April 29. The central bank targets annual inflation at 4.5 percent, plus or minus two percentage points.


Nine Straight


The bank on April 2 raised the Selic by 25 basis points to 11 percent, marking the ninth straight rate increase in efforts to slow consumer prices. Brazil’s policy makers have lifted borrowing costs the second most in the world in the past year behind Turkey.

Economists in the central bank survey also cut their 2014 and 2015 economic growth forecasts to 1.63 percent and 1.91 percent from 1.65 percent and 2 percent, respectively.

Rousseff on April 30 said she will alter the income tax table to raise take-home pay and boosted by 10 percent the value of cash transfers in the Bolsa Familia social welfare program to help keep its 36 million beneficiaries above the poverty line.

Consumer confidence as measured in April by the Getulio Vargas Foundation fell to the lowest level since May 2009. Both retail sales and industrial output in February grew at a slower pace than in January.

Latin America’s largest economy will expand 2 percent this year, central bank President Alexandre Tombini said on April 16. That compares with a 2.3 percent expansion in 2013.



--With assistance from Dominic carey in Sao Paulo.


To contact the reporter on this story: Matthew Malinowski in Brasilia at mmalinowski@bloomberg.net To contact the editors responsible for this story: Andre Soliani at asoliani@bloomberg.net Harry Maurer

* All content is copyrighted by Industry Intelligence, or the original respective author or source. You may not recirculate, redistrubte or publish the analysis and presentation included in the service without Industry Intelligence's prior written consent. Please review our terms of use.