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LONDON, Feb 9 (Reuters) - Brazil’s central bank is “confident” that inflation will fall towards 4.5 percent, the centre of its target range by the end of 2012, the central bank’s deputy governor for monetary policy said on Thursday.
Inflation ended last year at 6.5 percent, the highest rate in seven years -- the ceiling of the central bank’s target range.
“Internal activity is moderating and commodity prices will be lower...We are confident inflation will reduce to the central part of the target, which is 4.5 percent, by the end of 2012,” Aldo Mendes told an investment conference.
The central bank’s forecast is lower than expectations of private economists who expect average inflation of 5.29 percent this year, indicating the economy could be picking up steam again after several interest rate cuts.
There are also fears increased public spending will re-ignite inflation while the central bank has signalled interest rates could be cut further.
Mendes said most leading indicators were implying a slowdown, with the pace of industrial production and retail sales having eased in the second half of 2011.
“The trend is for deceleration,” Mendes said, adding that the central bank is expecting the economy to expand by 3.5 percent in 2012 after a likely 3 percent last year.
He also told the conference that Brazil would receive foreign direct investment (FDI) of around $50 billion in 2012, slowing from over $66 billion last year. (Reporting by Sujata Rao and Alessandra Prentice)