If Brazil is a proxy for China…
We better duck and cover.
Earlier today, Brazil’s central bank lowered its 2012 GDP forecast to 1.6% from 2.5%. The inflation forecast was also hiked to 5.2% from 4.7% in June. The 2013 inflation forecast was lowered to 4.9% from 5%.
The central bank has slashed 500 basis points off its benchmark Selic interest rate, and the government delivered a flurry of tax breaks and subsidized credit. All that stimulus is starting to support the economy, but may also stoke inflation that has accelerated on the back of a surge in global and domestic food prices.
Fitch has piled on by lowering Brazil growth forecast for next year.
Bonus: Back in June when Credit Suisse came out with a forecast for 1.5% growth, Brazil’s finance minister called it “a joke”.