Exclusive: Brazil cenbank sees better inflation outlook - source

BRASILIA Tue Jan 22, 2013 2:24pm EST

Brazil's President Dilma Rousseff speaks during breakfast with reporters at the Planalto Palace in Brasilia December 27, 2012. REUTERS/Ueslei Marcelino

Brazil's President Dilma Rousseff speaks during breakfast with reporters at the Planalto Palace in Brasilia December 27, 2012.

Credit: Reuters/Ueslei Marcelino

BRASILIA (Reuters) - New projections by Brazil's central bank show a slightly more benign outlook for inflation this year, a government source told Reuters on Tuesday, giving President Dilma Rousseff some breathing room as she tries to revive the sputtering economy.

The bank's latest projections suggest that an upcoming 20 percent cut in electricity prices should shave a full percentage point off consumer inflation by the end of 2013, the source said, speaking on condition of anonymity.

The bank's estimate of the electricity cuts' disinflationary effect is about double that of many private analysts. The more dovish forecast could make it easier for Rousseff to enact tax cuts and other stimulus measures without worrying about inflation breaching the bank's target range this year.

Independent economists on average see the IPCA inflation index finishing 2013 at 5.65 percent.

The central bank declined comment.

The bank also anticipates that an imminent rise in gasoline prices will push the IPCA consumer price index about 0.3 of a percentage point higher in 2013, the source said.

That forecast is based on Rousseff's government authorizing a roughly 7 percent increase in gasoline prices, although no final decision on the actual amount is expected until at least the beginning of February, the source said.

The central bank has declined to publicly release its forecast for the effect higher gasoline prices could have on inflation, because Rousseff has not made a decision yet.

(Reporting by Brian Winter and Todd Benson; Editing by Leslie Adler and Andrew Hay)

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