Brazil’s central bank cut its forecasts for economic growth and increased inflation projections as the economy deteriorated in the second quarter, MarketWatch reported. In its quarterly inflation report released Thursday, the bank forecast gross domestic product growth of 1.6% this year, down from the 2.6% forecast in the March report. In both cases, the figures were in line with market projections. As for consumer prices, the bank forecast inflation ending 2018 at 4.2%, up from the 3.8% forecast in March but still below the 4.5% target. Earlier this month, the bank kept its benchmark interest rate steady at 6.5%, saying that inflation is moving up towards its target while the economy remains sluggish. The bank said the inflation forecast in Thursday’s report is based on the premise that borrowing costs will remain the same and the exchange rate would stay at 3.70 Brazilian reais per dollar. Brazil’s currency is under pressure as global investors move away from emerging markets. The central bank said, however, that based on market predictions for interest rates and currency markets, 2019 inflation would be 3.7%.
