Economists predict Brazil will be cut to junk

Brazil has a 70% chance of being cut to junk status in coming years, according to a group of economists surveyed by Bloomberg, cited by local paper Exame.

Standard & Poor's, which said last week it is considering cutting Brazil's current rating of 'BBB-', one notch above junk, cited the country's political and economic challenges amidst the 'Car Wash' corruption investigation involving state-run oil giant Petrobras.

In mid-July, inflation in Brazil rose to 9.25%, more than double the central bank's target of 4.5%. According to 70% of the Bloomberg survey participants, inflation will not return to the desired level until 2017.

Benchmark interest rates have been raised seven times since the end of 2014 to 14.25%, the highest in nine years, in an attempt to gradually reduce prices.

Fourteen of the 15 economists surveyed predicted that the central bank would cut interest rates next year, and 60% said it would start to ease up during March or April.

Another 73% said the government would continue to miss its fiscal targets in the coming years. None of the economists thought the government would surpass its goals, and three-quarters said the downturn would last until next year.