SAO PAULO: Brazil's central bank lowered on Thursday its 2012 economic growth forecast and reinforced the case for a long period of low interest rates by saying inflation should ease next year.
The bank lowered its 2012 economic growth forecast to 1.0 percent from 1.6 percent previously, according to its latest quarterly inflation report.
The bank also lowered its 2013 inflation forecast to 4.8 percent from 4.9 percent previously, contrasting with market forecasts projecting inflation at 5.42 percent.
The government targets inflation at 4.5 percent, with a tolerance margin of plus or minus 2 percentage points.
The bank led by Alexandre Tombini repeated that monetary conditions should remain stable for a long period, and said that risks to the global financial stability remained high.
The central bank cut interest rates ten straight times since August 2011 to a record low of 7.25 percent to help President Dilma Rousseff in her efforts to revive economic growth.
However, sticky inflation and a fuel price hike announced on Wednesday by Finance Minister Guido Mantega have raised worries about the bank's ability to keep borrowing costs stable for a long period as it forecasts.
Consumer prices rose at their fastest monthly pace since May 2011 in the month to mid-December, data showed on Wednesday. Trailing 12-month inflation was at 5.78 percent, above the midpoint of the government's target range at 4.5 percent.
The central bank's estimate for 2012 inflation was revised up to 5.7 percent, from 5.2 percent previously.
The bank also said Brazil's economy should rebound next year, with an estimated growth of 3.3 percent in the 12-month period through the third quarter of 2013.
One year ago, the central bank said Brazil's economy would grow 3.5 percent in 2012, with an inflation rate of 4.7 percent.
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