Brazil Central Bank Sees 2010 Growth At 5.8%, IPCA At 4.6% - WSJ.com

Brazil Central Bank Sees 2010 Growth At 5.8%, IPCA At 4.6%

BRASILIA (Dow Jones)--Responding to the influence of strong local economic stimulus and an incipient global recovery, Brazil's economy should grow by 5.8% in 2010 from near zero this year, while inflation will accelerate to above the country's 4.5% annual inflation target, Brazil's central bank said Tuesday in its fourth-quarter inflation report.

The central bank revised its forecast for 2009 IPCA consumer price inflation upward to 4.3% from 4.2% seen earlier and lifted its projection for 2010 IPCA inflation to 4.6% from 4.4%. Meanwhile, it revised its economic growth projection for 2009 lower, to 0.2% from 0.8% seen in the previous report.

The monetary authority said the latest forecasts were based on an improving outlook abroad as well as a continued firm economic rebound locally.

'The scenario is based on a medium-term recovery in global economic activity on the external front, as well as continued expansion within a benign inflation environment on the domestic side,' the bank said. 'From the point of view of risks related to the inflation outlook, the main risk comes from the intensity of a domestic economic recovery, which will undergo still more important influence from economic policy stimulus.'

The bank, meanwhile, confirmed market expectations that inflation pressure could remain strong as the local economy stages a recovery, projecting 2011 inflation to remain above target at 4.6%.

The latest projections released by the central bank were based on an exchange rate of 1.75 Brazilian reals per dollar and a reference Selic interest rate of 8.75% annually.

-By Gerald Jeffris, Dow Jones Newswires; (5561) 3335-0832, gerald.jeffris@dowjones.com"