Brazil central bank seen raising rates to 8% this yr

Brazil's central bank will probably raise its benchmark interest rate this year to fight inflation as the economy recovers, a weekly central bank poll showed on Monday.

The Selic rate should end the year at eight per cent, up from a record low of 7.25 per cent, according to the median forecast of about 100 economists surveyed last week. They maintained their forecasts for end-2014 rate at 8.25 per cent. A Reuters poll on Thursday showed a slight majority of economists expected an increase this year after the central bank stopped forecasting stable rates for a long period.

The bank led by Alexandre Tombini, which cut the Selic rate ten consecutive times between August 2011 and October 2012 to boost Brazil's economy, has sought to calm inflation fears after a surprise jump in consumer prices in the past few months.

The view of a rate increase this year already helped curb inflation expectations, according to the poll. The outlook for the benchmark IPCA price index in the next 12 months dropped to a rise of 5.51 per cent, from 5.62 per cent in the prior week.

Inflation should end 2013 with an annual increase of 5.82 per cent, the poll showed, up from 5.70 per cent in the prior week's survey. Government data on Friday showed a surprise rise in consumer prices in February despite a government-sponsored cut in electricity rates. The central bank targets inflation at 4.5 per cent, with a tolerance margin of plus or minus two per centage points. Economists also trimmed their forecasts for growth of Latin America's largest economy in 2014 to 3.50 per cent, from 3.65 per cent in the previous poll. They raised their median estimate for 2013 GDP growth to 3.10 per cent, from 3.09 per cent.

Brazil, the world's seventh-largest economy, grew only 0.9 per cent last year.