Bank sees year of low growth, high inflation in Brazil

[BRASÍLIA] Brazil's central bank on Monday forecast stagnant growth and rising inflation for 2015, with Latin America's largest economy advancing just 0.13 per cent and inflation hitting 6.99 per cent.

The central bank's latest weekly forecast collating data from 100 financial institutions nationwide saw growth, which soared to 7.7 per cent in 2010, sliding back from the previous projection of 0.38 per cent - only the latest in a series of reined-in forecasts.

Inflation, which last year edged above a government ceiling of 6.5 per cent and well clear of a central target of 4.5 per cent, will rise from a current 6.67 to 6.99 per cent.

Last year saw inflation progressively creep up while market analysts and the government, as well as the International Monetary Fund, successively cut growth forecasts ever closer to zero amid concerns over capital flight and falling investment.

Brazil, which earlier this month posted its first annual trade deficit in 14 years, has suffered from a major drop in Chinese demand for its raw materials - a key factor behind the high growth seen five years ago.

Last week, the central bank raised its key interest rate by 50 basis points to 12.25 per cent in a bid to dampen inflationary pressures.

Leftist President Dilma Rousseff, reelected in October, has vowed to pursue austerity in her second term to rescue fraying public accounts and recoup investor confidence.

AFP