Brazil Economists Reduce 12-Month Inflation Forecast

Brazil’s inflation will slow in the next 12 months amid the fastest economic growth in more than two decades, according to the central bank’s weekly survey of about 100 economists published today.

Brazilian inflation in the next 12-month period will slow to 4.76 percent compared with last week’s forecast of 4.81 percent, the survey showed. The economy will expand 6.47 percent this year against 6.46 percent seen a week earlier, according to the survey.

Economists held their forecast for the benchmark interest rate this year and next, the survey showed. Policy makers will raise the Selic by 75 basis points to 10.25 percent in their June 8-9 meeting and to 11.75 percent by year-end. The rate will fall to 11.5 percent by the end of 2011, the survey showed.

Latin America’s biggest economy risks overheating as domestic demand fuels growth after emerging from a six-month recession in the second quarter of 2009. Policy makers raised the Selic in May for the first time since 2008 after central bank president Henrique Meirelles vowed “vigorous action” to bring inflation back to the government’s 4.5 percent target.

Brazil inflation expectations are “anchored” amid a declining trend in the benchmark interest rate, Meirelles said in Sao Paulo today. Brazil’s debt-to-gross domestic product ratio will fall this year, with foreign direct investments rising 15.7 percent to $45 billion, Meirelles said.