Brazil CPI Forecast Rises for First Time in 122 Weeks
January 24, 2011, 7:27 AM ESTBy Andre Soliani and Iuri Dantas
(Updates to add economist’s comments in sixth paragraph.)
Jan. 24 (Bloomberg) -- Analysts covering the Brazilian economy increased their 2012 inflation forecast for the first time in more than two years, raising bets the central bank will accelerate rate increases at its next meeting in March.
Economists expect consumer prices to rise 4.54 percent next year, up from a week-earlier forecast of 4.5 percent, according to the median forecast in a Jan. 21 central bank survey of about 100 economists published today. Analysts lifted their 2011 inflation forecast for a seventh straight week to 5.53 percent, up from 5.42 percent a week earlier, the survey said.
“This shows there are doubts about whether the central bank will do the necessary rate adjustments to bring inflation back to target,” Jankiel Santos, chief economist at Espirito Santo Investment Bank, said in a phone interview from Sao Paulo. “This reinforces the need for the central bank to keep acting, and there is no other way than by increasing rates.”
Traders are wagering the central bank will raise the benchmark interest rate next month for a second straight meeting, lifting the Selic rate to as high as 12 percent from its current 11.25 percent, Bloomberg estimates based on interest rate futures show.
Policy makers increased the overnight rate last week from 10.75 percent, saying higher borrowing costs coupled with measures to curb credit growth will help slow inflation toward its 4.5 percent target.
Copom Meeting
“Higher expectations for 2012 inflation in the Focus survey increases the probability of a 75 basis points increase at the next monetary policy meeting,” Cristiano Oliveira, chief economist at Banco Safra de Investimentos, said in a note to clients today. “Economic activity and inflation indicators in the short term should keep expectations high.”
Inflation, fueled by domestic demand and food prices, quickened to 5.91 percent last year, the fastest pace in 25 months. The next monetary policy meeting is scheduled for March 1-2.
Yields on interest rate futures contracts due in January 2012, the most traded on the Sao Paulo exchange, rose four basis points, or 0.04 percentage point, to 12.41 percent at 6:49 a.m. New York time. The real rose 0.3 percent to 1.6735 per dollar.
--Editors: Bill Faries, Richard Jarvie.
To contact the reporters on this story: Andre Soliani in Brasilia at asoliani@bloomberg.net Iuri Dantas in Brasilia at idantas@bloomberg.net
To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net
