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BRASILIA, March 27 (Reuters) - Brazil's central bank sharply raised its forecast for inflation in 2014 and sees the economy growing at a moderate pace, signaling it may prolong its rate-hiking cycle to battle naggingly high inflation in an electoral year.
The central bank hiked its 2014 inflation forecast to 6.1 percent from a previous estimate of 5.6 percent as a severe drought in southern Brazil hits crops and pushes up food prices.
In its quarterly inflation report released on Thursday, the bank also raised its estimate for inflation in 2015 to 5.5 percent from 5.4 percent, highlighting the price stickiness that has worried investors for the last three years. (Reporting by Silvio Cascione and Alonso Soto; Editing by Chizu Nomiyama)