UPDATE 1-Inflation expectations rise after Brazil c.bank decision - poll
(Adds background) BRASILIA, Jan 25 (Reuters) - Inflation expectations in Brazil rose sharply last week after the central bank kept unexpectedly held interest rates steady, a central bank poll of economists showed on Monday. Median forecasts for inflation in 2016 and 2017 rose to 7.23 percent and 5.65 percent respectively, up from 7.00 percent and 5.40 percent in the prior week's survey, according to the survey of about 100 economists. The government targets inflation at 4.5 percent. The central bank surprised investors last week by holding interest rates steady at 14.25 percent despite having promised to do "whatever was necessary" to lower inflation below 6.5 percent in 2016. Economists said the decision raised questions of political interference from leftist President Dilma Rousseff, whose government is worried that higher rates will hamper plans to revive the economy. Most Brazilians have endured bouts of hyperinflation until the creation of the real currency in 1994. Although the current spike is not nearly as severe as previous episodes of runaway inflation, it has helped erode the popularity of Rousseff struggling with a corruption scandal involving lawmakers from her Workers' Party and allied parties. Brazil is set to have both the worst recession and the third-highest inflation rate among G20 economies in 2016, according to Reuters Polls. (pct) 2016 2017 previous new previous new forecast forecast forecast forecast Consumer inflation 7.00 7.23 5.40 5.65 Exchange rate 4.25 4.30 4.30 4.40 (reais per U.S dollar, end-period) Interest rate 15.25 14.64 12.88 12.75 (end-period) GDP growth -2.99 -3.00 1.00 0.80 Industrial output -3.47 -3.57 1.80 1.50 (Reporting by Silvio Cascione Editing by W Simon)
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