SAO PAULO: Inflation expectations in Brazil nudged up despite a weaker outlook for economic growth this year, a central bank survey showed on Monday, reinforcing the view that policymakers will soon have to stop cutting interest rates.
Inflation expectations for 2012 and 2013 edged up to 5.20 and 5.51 percent respectively, according to the median forecast in the survey, conducted weekly. The forecasts one week earlier were respectively 5.19 percent and 5.50 percent.
That was the first change since June in the median market expectation for next year's inflation. The central bank targets annual inflation at 4.5 percent plus or minus 2 percentage points.
As inflation is seen accelerating, the central bank may soon stop cutting interest rates. Brazil's benchmark Selic rate will likely fall to 7.25 percent next month from 7.5 percent currently, the survey showed, a marginal decrease after nine larger cuts since August 2011, when it stood at 12.5 percent.
The view that the central bank will soon stop lowering rates was reinforced last week after it said further cuts should be done with "maximum parsimony" as the economy gears up.
The central bank could deliver more guidance on its monetary policy view on Thursday, when it releases the minutes of its last rate-setting meeting.
Inflation has not been a major concern for the Brazilian central bank this year, easing from a seven-year high of 6.5 percent in 2011 to just above 5 percent currently. Relatively modest price rises have allowed policymakers to focus on stimulating economic growth, which has disappointed amid the current global slowdown.
Economists trimmed their forecasts for Brazil's growth this year for the fifth straight week to 1.64 percent from a week-earlier prediction of 1.73 percent, according to the survey.
That would be the weakest annual performance since 2009 and a sharp slowdown from 7.5 percent growth two years ago.
The survey was finalized after Brazil's statistics agency IBGE released weaker than expected second-quarter gross domestic product data on Friday. Brazil grew just 0.4 percent between April and June from the first quarter.
In 2013, the Selic rate will likely rise back to 8.5 percent, the survey showed, while Brazil's gross domestic product is expected to grow at a 4 percent pace.
The poll results are the median forecast of analysts surveyed by the central bank at about 100 financial institutions.
Consumer prices were seen rising 0.38 percent in August from the previous month, up from 0.37 percent seen a week earlier.
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