Financial market forecasts inflation up 5.44% this year in Brazil
The financial market once again increased its prediction for the inflation in Brazil this year. According to the Focus market readout, published today (Jan. 7) by the country’s Central Bank, the Broad Consumer Price Index—the IPCA, which gauges Brazil’s official inflation—is likely to close out 2022 at 5.44 percent. This is the fourth time a hike in inflation is forecast for 2022. A week ago, the market had projected inflation up 5.38 percent at the end of the year, compared to 5.03 percent four weeks ago.
The weekly report combines estimates calculated by financial analysts for Brazil’s main economic indicators.
For 2023, analysts kept last week’s IPCA forecasts. The projection this week points towards an inflation of 3.50 percent. Two weeks ago, the forecast for next year stood at 3.40 percent. In 2024, the prediction is the same as in the last two weeks, three percent.
GDP
In the survey, the prediction made seven days ago for Brazil’s gross domestic product (GDP) in 2022 was retained at 0.3 percent. Four weeks ago, the market had reported an estimated expansion in the Brazilian economy of 0.36 percent.
For the third consecutive time, the readout brings an expected decline in the 2023’s GDP—from 1.55 last week to 1.53 percent. For 2024, the estimate was kept at two percent.
Interest
The market’s estimate for Brazil’s benchmark interest rate—the Selic—in 2022 was steady for the fourth time in a row, at 11.75 percent a year.
Last week, the Monetary Policy Committee (COPOM) raised the interest from a yearly 9.25 to 10.75 percent. The decision had been expected by financial analysts.
The rate gained its second figure for the first time since July 2017, when it stood at 10.25 percent a year. This year saw the eighth consecutive high in the Selic. In a statement, COPOM declared it should continue to increase its value until inflation is curbed in the medium term.
For the end of 2023, the market predicts the benchmark interest rate to drop to eight percent a year. For 2024, the Selic is expected at seven percent a year, a forecast that repeats that of the previous weeks.
Dollar
The market’s forecasts for the dollar in 2022 also held steady from last week’s projections—BRL 5.60. As for the next year, the market predicts that the currency should stand at BRL 5.50. For 2024, after a period of stability, the US currency should go from BRL 5.40, estimated last week, to BRL 5.39.
