BRASILIA: Brazil's central bank expects inflation to ease next year but still remain slightly above the official target, warning it is too early to consider cutting interest rates just yet.
In its quarterly inflation report released on Tuesday, the bank lowered its 2017 inflation forecast to 4.7 percent from 4.9 percent. For 2016, the bank raised its forecast to 6.9 percent from 6.6 percent.
The report is the bank's most solid outlook since Ilan Goldfajn became governor earlier this month with the promise to lower inflation to 4.5 percent, the center of the official target range.
Goldfajn, former chief economist of the country's largest private lender, Itau Unibanco, had not yet set a time frame to reach the target, raising speculation the goal could be changed to allow for early rate cuts.
Most market economists believe the central bank will lower the benchmark Selic rate later this year from its highest in nearly 10 years, at 14.25 percent currently.
Still, the central bank's high inflation forecasts show policymakers are in no hurry to slash borrowing costs even with the economy struggling with what could be its worst recession in a century.
The central bank expects Latin America's largest economy to contract 3.3 percent this year.
In the report, the central bank expects annual inflation to ease to 4.2 percent in the second quarter of 2018.
Comments
Comments are closed.