(Adds central bank and analyst comments and report details)
By Silvio Cascione and Alonso Soto
BRASILIA, March 30 Brazil's central bank said on
Thursday that lower inflation could allow it to step up its pace
of interest rate cuts and help pull the once-booming economy out
of its worst recession ever.
In a quarterly inflation report, the bank lowered its 2017
inflation market forecast to 4.0 percent from 4.7 percent in its
previous report. For 2018, its estimate remained at 4.5 percent,
at the center of its official target.
A more widely spread process of disinflation "strengthens
the chances of a moderate intensification of the pace of
monetary easing," the bank said.
At its last two meetings, the bank has cut its benchmark
Selic rate by 75 basis points each time. Still, at
12.25 percent, it remains one of highest reference rates for
major global economies.
"That 'moderate intensification' signals that the bank is
considering cutting rates by 100 basis points, but not by 125
basis points," said Thais Zara, chief economist with Sao
Paulo-based consultancy Rosenberg.
The length of the rate-cutting cycle will depend on the 2019
inflation estimates and the forecast for the country's
structural rates, or the rate that is neutral to inflation, the
The bank said its market forecast for annual inflation until
the first quarter of 2019 stood at 4.6 percent.
The bank also lowered its economic growth forecast to 0.5
percent from 0.8 percent for 2017, standing now in line with the
government and market forecasts.
A painfully slow recovery after two years of deep recession
have dragged down inflation that just over a year ago had
swelled to above 10 percent. Annual inflation currently stands
at 4.76 percent.
(Reporting by Silvio Cascione and Alonso Soto; Editing by Chizu
Nomiyama and Bernadette Baum)