Brazil's economy will contract 0.5% in 2015 and inflation will climb to 7.9%, ending the year far outside the tolerance range, the Central Bank admitted on Thursday in its latest quarterly inflation report.
The Central Bank, which considers inflation of between 2.5% and 6.5% to be tolerable, said there is a 90 percent possibility that year-end inflation will exceed the upper limit of that target range.
The official figure for 2014 GDP growth will be officially unveiled on Friday. That announcement is expected to confirm that the Brazilian economy contracted last year for the first time since 2009, when it shrank 0.33% amid the global recession.
Consumer prices in February rose 7.7% relative to the same month of 2014, the biggest jump in a decade, and, based on previous indicators, inflation could climb even higher in March.
The bank's governor Alexandre Tombini said on Tuesday during an appearance before the Senate that the inflation rate should be much lower in April than in the year's first three months.
To combat high inflation and a primary budget deficit (the balance before interest payments), President Dilma Rousseff's administration recently unveiled a series of austerity measures, including spending cuts and the paring back of tax breaks.
Rousseff has attributed the country's problems to the global financial crisis that erupted in 2008 and said the counter-cyclical measures the government had adopted until now, mainly state-subsidized credit and tax breaks that eventually sent public finances into the red, prevented the sharp rise in unemployment and violent slowdown in growth seen over the past six-and-a-half years in other countries.