Financial institutions forecast inflation up to 10.7%
Forecasts from financial institutions on inflation, measured by the National Broad Consumer Price Index (IPCA) rose for the 14th week straight, going from 10.61% to 10.70%.
For 2016, the IPCA estimate increased for the third consecutive time, from 6.80% to 6.87%. The forecasts were published today (Dec. 21) and can be found in the Central Bank's Focus Report, a weekly publication with data from financial institutions.
The two estimates are above the upper limit of the target, 6.5%. The center of the target is 4.5%. The Central Bank predicts that the inflation should not reach the center until 2017. The main tool used by the Central Bank to control price hikes is the benchmark Selic rate. The Monetary Policy Committee (COPOM), in charge of setting the Selic rate, raised it seven times in a row. In the committee's meetings in September, October and November, COPOM chose to keep Selic at 14.25% per annum.
The rate is used in negotiations for public bonds in the Special Clearance and Escrow System (Selic) and serves as reference for the other interest rates in the economy. By raising it, the Central Bank curbs excessive demand, as higher interest rates make credit more expensive and stimulate savings.
GDP
High inflation comes along a shrinking economy both this year and the next. The forecast for the reduction in the country's GDP went from 3.62% to 3.70% this year, the fifth consecutive change. For 2016, the estimated fall was altered for the 11th time straight—from 2.67% to 2.80%
The forecast for the dollar exchange rate remains at R$ 3.90 for the end of 2015, and R$ 4.20 for late 2016.
Translated by Fabrício Ferreira
Fonte: Financial institutions forecast inflation up to 10.7%
