Brazil's central bank won't be able to save the country with monetary policy, economists warned, after downgrading their 2015 growth outlook to zero as stagflation drags the once vibrant economy.
"There is no near-term solution to deepening stagflation," said Dev Ashish, Latin America economist at Societe Generale in a note on Wednesday. "Fiscal and monetary orthodoxy is not expected to yield any fruit in the near to medium term."
Annual inflation shot up to a twelve-year high of 7.1 percent in January, according to official data on Friday, well above the central bank's 4.5 percent target range. With inflation widely expected to remain elevated, analysts in Brazil revised their 2015 gross domestic product (GDP) growth forecast to zero, according to a central bank survey this week.
South America's largest nation is estimated to have grown less than 1 percent last year.
Brazil's central bank - the Banco Central do Brasil (BCP) - engaged in an aggressive tightening cycle last year to combat inflation. It pushed the benchmark short-term interest rate, the Selic, to its current multi-year high of 12.25 percent. Markets widely expect more rate hikes in the coming months.