Brazil inflation f’cast dips; 1st time in 2 months

Brazilian economists lowered
their forecasts for 2011 inflation for the first time in two
months in a weekly central bank survey published on Monday, a
sign government measures to fight rising prices could be taking
hold.

Economists saw the benchmark IPCA inflation index ending
the year at 6.33 percent, down from a forecast of 6.37 percent
in the previous survey.

The lower forecast follows a smaller-than-expected rise in
the IPCA on Friday that sent yields on interest rate futures
contracts falling, even as the annual inflation rate pierced
the top of the government’s target range. For details, see
[ID:nN06301220]

The fall in expectations came on the back of the IPCA
reading, said Thais Marzola Zara, chief economist for Rosenberg
& Associados consultancy.

Forecasts for this year’s IPCA index should now hover
between 6.3 percent and 6.4 percent in the coming weeks, Zara
added.

The central bank has taken a tougher line on inflation
recently. In minutes from last month’s rate-setting meeting, in
which the bank raised the benchmark Selic rate to 12 percent
from 11.75 percent, policymakers emphasized the need for a
“prolonged” cycle of tightening. [ID:nN28213276]

That gave some relief to investors who had fretted the bank
was not doing enough to rein in price increases.

“They’re taking a more conservative stance,” Zara said.
“We’ll have to see what happens from here, but they’re a little
more worried about inflation now.”

The weekly survey, which represents the median forecast of
analysts at about 100 financial institutions polled by the
central bank, forecast growth of 4 percent in Latin America’s
biggest economy this year, the same view as last week.

Brazil’s economy grew 7.5 percent last year, the fastest in
24 years and one of the most robust rates among major
economies. That pace is expected to slow as the government
steps in to avoid overheating by tightening credit and cutting
bloated public spending.

Economists held their forecast for 2012 inflation at 5
percent, seeing the rate moving closer to the center of the
government’s target of 4.5 percent, plus or minus 2 percentage
points. The Selic interest rate should end the year at 12.50
percent, economists said, falling to 12.25 percent in 2012.