Brazil's economic activity index fell 1.4 percent in May relative to the previous month, the largest monthly drop since December 2008, the Central Bank said Friday.

The index, known as the IBC-Br, is considered a leading indicator for gross domestic product growth or contraction.

The Brazilian economy grew just 0.6 percent in the first quarter of this year, below official and market forecasts, prompting both government and private-sector economists to lower their projections for GDP growth in 2013.

Private-sector analysts are projecting Brazil's economy to grow between 2 percent and 2.7 percent this year, below the government's forecast for 3 percent growth.

The Central Bank on Wednesday announced that it was raising its benchmark interest rate by a half-point to 8.5 percent in a bid to keep inflation under control.

The rate hike could hamper Brazilian economic growth by making credit more expensive and dampening household spending. EFE