Brazil Analysts Cut 2010 Interest Rate, CPI Outlooks

Analysts covering Brazil’s economy cut their year-end forecast for the benchmark lending rate by a quarter point in a weekly central bank survey after policy makers last week said inflation risks have dropped.

The central bank’s eight-member board, led by Henrique Meirelles, will raise the Selic to 11.75 percent by year end, compared with a week earlier forecast of 12 percent, according to the median forecast in a July 23 central bank survey of about 100 economists published today.

Policy makers meeting July 20-21 raised the overnight rate to 10.75 percent from 10.25 percent, surprising 48 of 51 economists, who expected a 75 basis-point increase.

Consumer price inflation will end 2010 at 5.35 percent, compared with a week earlier forecast of 5.42 percent, the survey shows. The forecast for 12-month inflation was cut to 4.93 percent, down from 4.96 percent, according to the survey.

The real rose 0.2 percent to 1.7697 per U.S. dollar at 8:11 a.m. New York time, from 1.7738 on July 23. In the overnight interest-rate futures market, the yield on the contract due in January 2012 was unchanged at 11.70 percent.