Brazil Analysts Raise CPI Outlook for Third Week

Analyst covering the Brazilian economy raised their 12-month inflation  forecast for a third straight week, cementing expectation the central bank will raise the benchmark interest rate to 11 percent this week.

Consumer prices will increase 4.96 percent in the 12 months ahead, compared with a previous forecast of 4.90 percent, according to the median forecast in a July 16 central bank survey of about 100 economists published today. Economists held their 2010 economic growth forecast at 7.2 percent.

Policy makers meeting July 20-21 will raise the overnight rate for a third consecutive time by 0.75 percentage point in a bid to slow an economic expansion that is stoking inflation, according to all 26 economists surveyed by Bloomberg. Latin America’s biggest economy will expand at the fastest pace in more than two decades in 2010 while consumer prices exceed the government’s 4.5 percent target, the bank survey shows.

“Looking at the figures, I see no reason for policy makers to ease the pace of interest rate increases,” Zeina Latif, chief economist at ING Bank NV in Sao Paulo, said in a phone interview. “I expect the 12-month inflation outlook to ease, but it isn’t happening yet.”

The yield on interest-rate future contract maturing in January declined four basis points, or 0.04 percentage point, to 11.02 percent at 8:26 a.m. New York time.