Brazil’s Inflation Forecast to Rise Even Further in 2015

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – The Central Bank in Brazil has increased once again its forecast for inflation this year. According to the latest Quarterly Inflation Report, released on Thursday by the institution, inflation in 2015 should increase to 9.5 percent from the nine percent forecast in June, while the Selic should remain at 14.25 percent until the end of the year.

In a surprising move, Central Bank President Alexandre Tombini himself attended the press conference to talk about the details of the report and answer questions by reporters. According to Tombini Brazil’s monetary policy strategy is to maintain the current 14.25 percent Selic (benchmark interest rate) ‘for a prolonged period of time’.

The Central Bank president told reporters that the volatility seen in markets in the past week would not guide the future trajectory of the Selic, “It (increased interest rate) will not serve to guide the monetary policy during the upcoming months,” he stated.

Tombini also told reporters that the Central Bank was working with the Treasury Department and would be willing to sell international reserves to decrease the strong volatility seen in the foreign exchange market in the past few days. The Brazilian real opened down on Thursday and before the press conference was at R$4.24 to US$1. After the meeting the US$ currency registered a slight depreciation, closing the day at R$3.99 to US$1.

The Central Bank stated in its report that after a period of high volatility the rhythm of economic activity should once again start to increase. In the medium term, concludes the report, consumption tends to grow and investments should increase.