Brazil economists see higher inflation in 2012

Economists held their forecast for Brazilian inflation in 2011 but raised their views for consumer prices next year, underscoring worries about Latin America’s largest economy.

Analysts held their view for the 2011 benchmark IPCA price index at 6.31 percent in a weekly central bank survey published on Monday.

But for next year, analysts saw the IPCA at 5.28 percent, up from 5.20 percent in the previous week.

That’s closer to a government ceiling of 6.5 percent for inflation, set for this year as well as next.

The survey’s predictions represent the median forecast of analysts polled by the central bank at about 100 financial institutions.

Inflation has become a political headache this year, with the 12-month rate breaching the 6.5 percent ceiling every month since April. The central bank raised interest rates five times this year, to 12.50 percent from 10.75 percent, to try to brake inflation.

The Selic interest rate should end this year and next at 12.75 percent, economists in the survey forecast.

For President Dilma Rousseff, whose power base draws significantly from lower-income voters, higher inflation rates threaten to erode the political clout she needs to pass major reforms, such as a tax overhaul, through Congress.

Nor is Brazil alone in this worry. Fellow emerging market giants such as China and India are also tightening monetary policy to clamp down on credit and cool their economies.

In contrast, many more developed economies, such as the United States, still have near-zero interest rates in a bid to boost lackluster growth.