The Brazilian Central Bank on Thursday released its quarterly inflation report, cutting its forecast for 2017 inflation and maintaining its previous projection for very modest GDP expansion. The bank said inflation is likely to end the year at 3.8%, down from its previous projection of 4.0%. It held its GDP projection at just 0.5%. But even that modest forecast depends on congressional approval for structural reforms in areas such as labor and pensions, the bank said. The bank hinted at continued interest rate reductions but noted that current uncertainties about reforms might dictate a more cautious approach than previously. Over the past several months the bank has cut its base rate from 14.25% to 10.25%. President Michel Temer is struggling to win approval of labor and pension reforms in Congress. The reforms would create a more dynamic labor market and reduce heavy government deficits. But allegations of corruption hang over the President, weakening Temer politically and making congressional approval more difficult.
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