Financial market raises Brazil estimated inflation to 5.5% in 2022

The financial market once again increased its forecast for this year’s inflation. According to an estimate from the Focus market readout, published by the Central Bank today (Feb. 14), the National Broad Consumer Price Index, the IPCA—which gauges the country’s official inflation—is likely to close out 2022 at 5.5 percent. This is the fifth time the market predicts a hike in inflation this year. A week ago, the market had expected the inflation to end the year at 5.44 percent. Four weeks ago, the estimate was 5.09 percent.

For 2023, the market retained last week’s expectations on the IPCA. The projection points towards 3.5 percent inflation for the coming year. Four weeks ago, the inflation forecast had been 3.4 percent. For 2024, the market also raised its estimated inflation to 3.04 percent, compared to the three percent predicted last week.

GDP

The weekly report combines the market’s estimates for all of the country’s main economic indicators. Among the predictions this week, the readout kept its estimate for the country’s gross domestic product from seven days ago. The estimate stands at 0.3 percent in 2022. Four weeks ago, the market forecast a growth of 0.29 percent in the Brazilian economy.

Interest and exchange

The market also expanded its 2022 forecast for the country’s benchmark interest rate, the Selic. In its Monday estimate, the market predicted Selic at 12.25 percent, against last week’s 11.75 percent.

Early this month, Brazil’s Monetary Policy Committee (Copom) increased the interest rate from 9.25 to 10.75 percent a year. In a statement, the authority reported it should continue raising the rate until inflation is controlled in the medium run.

For the end of 2023, the market expects the benchmark interest rate to slip to eight percent a year. For 2024, Selic should stand at 7.25 percent a year, compared to last week’s seven percent.

The market’s forecast for the dollar in 2020 shrank to BRL 5.58, compared to an estimated BRL 5.6 last week. For next year, the market’s projection also dropped, from BRL 5.5 to 5.45.

For 2024, after a period of stability, the estimate for the US currency declined slightly for the second consecutive week, going from BRL 5.39 projected last week to BRL 5.32.