Brazil Economists See Less Room for Cutting Rates Next Year

Brazil analysts forecast that the central bank will have less room for cutting rates next year, as inflation expectations for 2016 rose for the 10th straight week.





Brazil’s benchmark Selic rate will reach 12.63 percent at year-end 2016, up from the previous week’s estimate of 12.50 percent, according to the Oct. 9 central bank survey of about 100 analysts. The economists raised their estimates for 2015 and 2016 inflation to 9.70 percent and 6.05 percent respectively, and cut their growth forecasts to declines of 2.97 percent this year and 1.2 percent next year.



Political strife that’s contributing to Brazil’s economic slump continues even after President Dilma Rousseff shuffled her Cabinet to strengthen the ruling coalition in Congress. Key votes on measures to help mend the budget deficit have been postponed, and the head of the lower house is expected to rule soon on whether to accept proposals to begin impeachment proceedings against the president.



The central bank held Brazil’s key rate at 14.25 percent on Sept. 2 after increasing it by 3.25 points. Central bank President Alexandre Tombini said on Sept. 24 that keeping rates at that level for a prolonged period is necessary to slow inflation to the target by the end of 2016. Brazil aims for inflation of 4.5 percent plus or minus two percentage points.



 Brazil’s inflation in the 12 months through September decelerated to 9.49 percent from 9.53 percent the previous month. Analysts forecast the country is headed for its first two-year recession since 1931.



Brazil Economists See Less Room for Cutting Rates Next Year - Bloomberg Business: