Brazil will end this year with a 12-month inflation rate of 9.5%, the central bank said.

The slew of bad figures hit currency markets: the real hit fresh lows against the USA dollar, despite intervention by the Central Bank to try to limit the slide.

Tombini also reaffirmed its policy of keeping interest rates at current levels for a prolonged period even as it raised its inflation forecast to well above its official target.

Brazil’s main stock index .BVSP also rebounded from earlier losses of as much as 2.0 percent and was up 0.2 percent in late afternoon trading. Its projection of contraction in the Gross Domestic Product (GDP), the sum of all goods and services produced in the country, has been revised down from the 1.1% forecast it had released in June to 2.7%, as per the Inflation Report issued this Thursday (24th).

The monetary authority’s view of inflation for this year and next year also worsened.

The data showed that lending interest rates as well as spreads, or what banks charge borrowers relative to the cost of fundraising, rose in August, in a sign local lenders, especially private-sector banks, have become increasingly prudent as Latin America’s largest economy slipped into recession.

The deepening political and financial crisis has fueled concern that another credit rating agency will follow Standard & Poor’s example and cut Brazil’s rating to junk, forcing many global funds to dump its bonds from their portfolios. Brazil’s Congress early on Wednesday upheld key presidential vetoes to avert a surge in public expenditure and postponed a decision on a possible salary increase for judiciary employees, in a rare victory for an embattled government struggling to rebalance its fiscal accounts.

“This is an acute and lasting crisis and as of now without the least prospect of improvement”, he said. The CDS have risen nearly 200 bps since the end of August and last traded above 500 bps in October 2008.