Brazil Analysts See Faster Inflation in 2010, 2011

Brazilian inflation will quicken to 5.20 percent in 2010, compared with a week-earlier forecast of 5.15 percent, according to the median forecast in an Oct. 15 central bank survey of about 100 economists published today.

Consumer prices will rise 4.99 percent in 2011, from a week earlier forecast of 4.98 percent, the survey found.

Analysts expect the central bank to resume interest rate increases in April next year as domestic demand stokes inflation. Policy makers held the benchmark rate unchanged at 10.75 percent at their Aug. 31-Sept. 1 meeting, after raising it 200 basis points this year from a record low 8.75 percent.

Analysts forecast that the real will end the year trading at 1.70 per dollar, from a week-earlier forecast of 1.75, the survey found.

The real on Oct. 15 weakened 0.3 percent to 1.6651 per dollar from 1.6602 a day earlier.

Brazil’s retail sales rose at a faster-than-expected 2.0 percent in August from a month earlier, fueled by record low unemployment and credit expansion.

The country’s unemployment rate unexpectedly fell to 6.7 percent in August, signaling Latin America’s biggest economy continues to expand at a pace that may stoke inflation. At the same time, bank lending expanded in August at its fastest pace since July 2009, according to central bank figures.

Policy makers forecast inflation will slow to 4.6 percent next year should the benchmark rate remain unchanged at 10.75 percent, according to a Sept 30 report. The bank targets inflation of 4.5 percent plus or minus two percentage points.

The bank holds its second-last monetary policy meeting of 2010 on Oct. 19-20.