Brazil financial market forecasts lower inflation this year

The financial market once again estimates a low in inflation for 2016. Analysts predict that the Broad Consumer Price Index, used by the government to establish its target for inflation, close out the year at 7.34% and no longer at 7.36%, as had been estimated last week. For 2017, the forecast was maintained at 5.12%. The figures can be found in the Focus Market Readout, released every Monday by the Central Bank.

The numbers are above the government-set 4.5% center of the target for inflation. The upper limit of the target stands at 6.5% for this year, and 6% for 2017.

One of the tools used to influence economic activity and therefore inflation, SELIC, the country's benchmark interest rate, is currently reported at 14.25% per annum. The expectations of financial institutions for the rate remains at a yearly 13.75% for the end of 2016 and 11% for the end of 2017.

GDP

As for Brazil's gross domestic product (GDP), the reduction forecast for 2016 underwent a slight improvement, going from 3.18% to 3.16%. For 2017, the growth predicted went up to 1.36% from 1.30%.

The exchange rate predicted for the dollar at the end of this year was revised up from R$3.25 to R$3.30. For 2017, the estimate was kept at R$3.45.

Translated by Fabrício Ferreira