Analysts covering Brazil’s economy raised their 2012 inflation forecast for a 13th straight week, as record low borrowing costs and a recovery in Latin America’s biggest economy stokes demand.
Consumer prices will rise 5.42 percent this year, according to the median estimate in a central bank survey of about 100 analysts published today. Analysts had forecast inflation of 5.36 percent the previous week.
President Dilma Rousseff’s government is working to revive the economy, which analysts forecast will expand this year at the slowest pace among major emerging markets. Since August 2011, policy makers have reduced the benchmark Selic rate 500 basis points to a record 7.5 percent, extended tax cuts for consumers and pressured banks to lower lending costs. Traders are betting on an additional 25 point rate cut this week.
Some indicators signal that growth may be picking up. Consumer confidence rose in August for the first time in five months while retail sales in July beat economists’ forecasts and rose at the second-fastest pace since January. Industrial production rose 1.5 percent in August, the third straight monthly increase, as car sales benefitting from the tax cuts soared to a record.
Still, consumer default rates in August remained at the highest level in almost three years, even as average interest rates on loans fell to record lows. Brazil’s trade surplus in September also declined to its lowest level in 18 months amid weaker demand from China and Europe for the country’s exports.
Last month, the central bank cut its 2012 growth forecast to 1.6 percent from 2.5 percent, adding that growth will reach 3.3 percent in next year’s second quarter.
In today’s survey economists left unchanged their forecast for gross domestic product to expand 1.57 percent this year and 4 percent in 2013.
As the stimulus measures have taken effect, inflation has accelerated, spurred by droughts that have driven up the cost of food. Inflation quickened in September for the third straight month, to 5.28 percent.
Carlos Hamilton, the central bank’s economic policy director, said last month that inflation is unlikely to converge to the bank’s 4.5 percent target until the third quarter of 2013.
In today’s survey, analysts reduced their forecast for 2013 inflation for a second straight week to 5.44 percent, anticipating that policy makers will have to reverse course next year and begin raising the Selic rate. Over the next 12 months, inflation should reach 5.50 percent, down from 5.52 percent in the previous week’s survey.