The financial market has again raised its inflation forecast for this year. According to the projection of the Focus Bulletin, released today (2) by the Central Bank, the Broad Consumer Price Index (IPCA) should close this year at 5.65%. It is the eighth consecutive time that the market projects an increase in the IPCA. A week ago, the market forecast was that inflation this year would be 5.6%. Four weeks ago the forecast was 5.44%.
Published weekly, the Focus Bulletin gathers the projection of more than 100 market institutions for the main economic indicators of the country. A few weeks ago, market estimates were already pointing to inflation this year above the target set by the National Monetary Council (CMN) of 3.5%, with a variation of 1.5 percentage points.
In February, the Monetary Policy Committee (Copom) also showed in its minutes that its inflation projections were also above the target.
“The Copom inflation projections are around 5.4% for 2022 and 3.2% for 2023. This scenario assumes an interest rate trajectory that rises to 12% pa in the first half of 2022, ends the year in 11.75% pa”, says the Copom minutes.
For 2023, the market maintained last week’s target in relation to the evolution of the IPCA. As a result, this week’s projection points to an inflation of 3.51%. Four weeks ago, the projection was for an inflation of 3.5% next year.
For 2024, the market also maintained last week’s forecast of 3.1%.
GDP
In this week’s projection, the Focus also raised the forecast of the Gross Domestic Product (GDP, sum of goods and services produced in the country) registered seven days ago. The new projection is for a GDP of 0.42% in 2022, compared to the 0.3% forecast last week. The increase occurs after the release of the 2021 GDP, which was 4.6%.
For 2023, the Focus Bulletin also recorded the same GDP expectation as last week, of 1.5%. Four weeks ago, the forecast was that GDP would grow 1.53%. For 2024, the projection remained stable at 2%.
Interest rate and exchange
The market maintained the forecast for the basic interest rate, the Selic, for 2022. In the projection released this Monday, the Selic should remain at 12.25%. Four weeks ago, the projection was that interest rates would stay at 11.75%.
In February, in addition to estimating inflation above the target, the Copom also increased the interest rate from 9.25% to 10.75% per year. In a statement, the Copom indicated that it will continue to raise basic interest rates until inflation is controlled in the medium term.
For the end of 2023, the market estimate is that the base rate will remain at 8.5% per year, compared to 8% last week. And for 2024, the forecast also increased, from 7.25% in the previous week to 7.38% per year.
The market’s expectation for the dollar exchange rate in 2022 was R$5.40, a reduction compared to what was projected last week, when the market predicted an exchange rate of R$5.50. For the next year, the market forecast also decreased, from R$5.31 to R$5.30. For 2024, the estimate for the price of the American currency was R$ 5.30, the same value projected last week.
