Financial market raises estimated inflation from 3.54% to 4.21%
The estimate calculated by the financial market for Brazil’s official inflation, as gauged by the National Broad Consumer Price Index, the IPCA, went up from 3.54 to 4.21 percent.
The forecast can be found in the Focus market readout, published today (Dec. 7) by the country’s Central Bank with projections for the main economic indicators.
This is the 17th consecutive spike in the prediction, for the first time surpassing the center of the four percent target set for inflation this year. Considering the 1.5 percentage point margin, plus or minus, the rate, however, is still within the target, as it can change from 2.5 to 5.5 percent.
The forecast for the inflation in 2021 was also revised and slid from 3.47 to 3.34 percent, deviating from the upward trend observed until last week. The estimates for 2022 and 2023 held steady at 3.50 and 3.25 percent, respectively.
Benchmark interest rate
Also reported in the document is the country’s benchmark interest, or Selic, the main tool used by the Central Bank to meet the inflation target. The estimated rate was kept unchanged at two percent a year for the end of 2020.
This year’s last meeting of the Monetary Policy Committee (Copom), in charge of the determining the Selic, is slated to take place tomorrow (Dec. 8) and Wednesday (9).
When the Copom increases the benchmark interest, the goal is to curb a warm demand, which makes an impact on prices as higher interest makes credit more expensive and stimulates saving.
When the Selic is retained, the committee believes previous changes were enough to keep inflation in check.
Economic activity and the dollar
The financial market also rose its prediction for economic retraction this year from 4.5 to 4.4 percent. Last week, estimated growth for 2021 went from 3.45 to 3.5 percent.
In 2022 and 2023, the country’s GDP is expected to grow 2.5 percent.
Also according to the readout, the predited dollar rate for the end of the year stands at R$5.22—down from R$5.36 in the previous survey, conducted a week ago. For 2021, the financial market reduced the estimate from $5.20 to R$5.10, and, for 2020, preserved it at R$5.
