Brazil’s Economists See 2010 Inflation Above Target
Brazilian inflation will quicken above policy makers’ target this year, according to economists surveyed by the central bank.
Consumer prices, as measured by the benchmark IPCA index, will rise 4.6 percent this year, up from a week-earlier forecast of 4.5 percent, according to the median forecast in a Jan. 22 central bank survey published today. The bank targets inflation of 4.5 percent plus or minus 2 percentage points.
Traders expect the central bank to raise interest rates to at least 9 percent, up from a record low 8.75 percent, as early as March to keep inflation in check, according to Bloomberg estimates based on interest rate futures contracts. The benchmark lending rate will be pushed up to 11.25 percent by year-end, according to the central bank survey.
“March would be a good month to start raising rates and to send out a clear message — the central bank is watching inflation and is ready to increase rates as needed,” Carlos Eduardo de Freitas, a former central bank director, said in an interview from Rio de Janeiro guaranteed payday loans.
The annual inflation rate is likely to remain between 4 percent and 4.5 percent if policy makers start acting in March, said Freitas, who is a partner at OF Consultoria Economica, an economic research company in Brasilia.
“Should they wait until the last quarter of the year, consumer prices could rise more than 5 percent this year,” he said.
Economists in the bank’s weekly survey forecast that Latin America’s biggest economy will expand 5.3 percent this year, after contracting 0.26 percent in 2009.
The real gained 0.2 percent to 1.8210 per U.S. dollar at 11:18 a.m. New York time from 1.8247 on Jan. 22.