SAO PAULO: Brazil's central bank lowered its 2012 inflation outlook to below the government's target but raised its forecast for 2013, reinforcing the view that the current cycle of interest rate cuts is coming to an end, the bank's quarterly inflation report showed on Thursday.
Brazil's central bank lowered its inflation forecast for 2012 to 4.4 percent from 4.7 percent previously. But consumer prices should accelerate in 2013, the bank said, forecasting a 5.2-percent inflation rate, from 4.7 percent previously.
The bank targets inflation at 4.5 percent with a leeway of plus or minus 2 percentage points.
The last time calendar year inflation was below target was in 2009, when consumer prices rose 4.3 percent, as gauged by the bench-mark IPCA consumer price index. In its inflation report released on Thursday, the central bank kept its forecast for economic growth this year unchanged at 3.5 percent. That would mark an increase from 2.7 percent growth in 2011.
The bank has been at the forefront of President Dilma Rousseff's efforts to revive growth after the economy nearly dipped into recession in late 2011.
Since last August, the central bank slashed interest rates five straight times to 9.75 and policymakers said they are very likely to stabilize at "slightly above" the all-time low of 8.75 percent.
In central bank minutes, the central bank said that global economic conditions are still contributing to slow inflation.
"Since the last report, domestic developments indicate a favorable balance of risks in a relevant horizon," the report said, referring to inflation.
Finance Minister Guido Mantega is also expected to unveil on Tuesday more tax breaks and other fiscal measures to stimulate the country's ailing industry, partly responsible for dragging down overall economic growth in 2011.
But analysts have been long warning that the government's aggressive push to revive growth risks stoking inflation.
Domestic demand remains robust and unemployment near record lows, which could quickly pressure services costs upward as the economy picks up speed through 2012.
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