Brazil raises 2015 inflation outlook to 9%

Brazil's central bank raised its 2015 inflation forecast to nine percent Wednesday, twice its target and a further sign of the bad year facing the world's seventh-largest economy.

The central bank also cut its economic growth outlook, predicting a contraction of 1.1 percent this year instead of the 0.5 percent it had previously forecast.

That is in line with the government's own forecast of a 1.2 percent contraction.

The central bank had previously predicted annual inflation of 7.9 percent this year -- already higher than its target of 4.5 percent and outside the tolerance range of plus or minus two percentage points.

The bank has raised the key interest rate at each of its last six meetings in a bid to rein in rising prices.

But with the rate already high at 13.75 percent and the economy stagnant, policymakers are caught between a rock and a hard place.

The bank hinted at further rate increases, saying "determination and perseverance" would be needed to stop the inflation outlook from getting even worse.

Last year, inflation came in at 6.4 percent.

Brazil's economy posted 0.1 percent growth last year, its fourth lackluster year in a row and a precipitous drop from the 7.6 percent it chalked up in 2010.

The fall in global commodity prices, a fiscal deficit, a weak currency and rising unemployment are all hurting the economy.

The government predicts the economy will return to growth of one percent in 2016.