Brazil Economists Reduce CPI and 2012 Growth Estimates

Brazil economists cut their forecast for economic growth next year and raised estimates for inflation as the government steps up efforts to cool off the economy, according to a central bank survey.

Brazilian consumer prices will rise 5.11 percent over the next 12 months, down from last week’s forecast of 5.22 percent, according to the median forecast in a May 20 central bank survey of about 100 economists published today. Prices, as measured by the IPCA index, will rise 5.1 percent, higher than the 5 percent median forecast in the previous week’s survey.

Economists expect Brazil’s gross domestic product to rise 4.1 percent next year, lower than the 4.2 percent median estimate of the previous survey.

President Dilma Rousseff’s administration is relying on a mix of higher interest rates, spending cuts and measures to curb credit growth to fight the fastest inflation in more than five years. Consumer prices rose 6.51 percent in the year through mid-May, matching the reading of the benchmark IPCA index in April, which breached the upper limit of the government’s target range for the first time since 2005.

The government targets inflation of 4.5 percent, plus or minus two percentage points.

Economists held their 2011 growth forecast at 4 percent. Consumer inflation this year will rise 6.27 percent, down from the 6.31 percent forecast in the previous survey.

The central bank will increase its benchmark interest rate 50 basis points to 12.50 percent by the end of 2011, before lowering it to 12.25 by year-end 2012, the survey found.

Brazil has “work ahead” to bring inflation back to the mid-point of its target range next year, central bank President Alexandre Tombini said May 19.

The central bank will adjust monetary policy for long enough to slow inflation to 4.5 percent next year, Tombini said.