(Bloomberg) --
Brazil's central bank cut its 2019 growth forecast by more than half, blaming factors including falling confidence, a weaker than expected first quarter and a global slowdown.
Latin America's largest economy will expand 0.8% this year, down from the previous estimate of 2% in March, according to the central bank's quarterly inflation report published on Thursday. Policy makers are more pessimistic than analysts surveyed by the bank, who now expect gross domestic product to grow 0.87% in 2019 after cutting estimates for 17 consecutive weeks.
Key Insights
- The central bank expects consumer prices to rise by 3.6% this year, 3.7% in 2020 and 3.9% in 2021 in the reference outlook, which entails a steady benchmark interest rate and currency
- In an outlook using economic parameters from its weekly analyst survey, the central bank expects consumer prices to rise 3.6% this year, 3.9% in 2020 and 3.9% in 2021
- Policy makers target inflation at 4.25% this year, 4% in 2020 and 3.75% in 2021. Click here to see consumer price forecasts from the previous report in March
- The monetary authority, led by its President Roberto Campos Neto, last week held its benchmark interest rate at an all-time low of 6.5% and signaled it could lower borrowing costs if economic reforms advance in Congress
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- In remarks to reporters later on Thursday, Campos Neto said monitoring the impact from uncertainty on Brazil inflation is crucial, and added that the bank's base outlook is for economic reform approval.
- Campos Neto said there's no change in the central bank's currency policy, and noted that the institution considers all types of currency tools.
- Risks of a "more expressive" global economic slowdown persist, policy makers wrote in their report. They added that uncertainties over a trade war between the U.S. and China increased in recent weeks.
- Brazil policy makers will meet later on Thursday to set the 2022 inflation target
To contact the reporter on this story: Mario Sergio Lima in Brasilia Newsroom at mlima11@bloomberg.net
To contact the editors responsible for this story: Walter Brandimarte at wbrandimarte@bloomberg.net, ;Juan Pablo Spinetto at jspinetto@bloomberg.net, Matthew Malinowski
©2019 Bloomberg L.P.
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