Financial market forecasts for the main economic indicators in 2024 – such as economic expansion and the inflation index – remained stable in this Monday’s (30) edition of the Focus Bulletin. The survey – carried out with economists – is released weekly by the Central Bank (BC).
For this year, the expectation for economic growth is 3%.
In the second quarter of the year, the Gross Domestic Product (GDP – the sum of goods and services produced in the country) surprised and rose 1.4%compared to the first quarter. According to the Brazilian Institute of Geography and Statistics (IBGE), in relation to the second quarter of 2023, the increase was 3.3%.
For 2025, the Gross Domestic Product (GDP – the sum of goods and services produced in the country) should remain at 1.92%, according to Focus data. For 2025 and 2026, the financial market projects GDP expansion of 2% for both years.
In 2023, also exceeding projections, the Brazilian economy grew 2.9%with a total value of R$10.9 trillion, according to IBGE. In 2022, the growth rate had been 3%.
The dollar exchange rate forecast is R$5.40 for the end of this year. At the end of 2025, the forecast is that the North American currency will be at R$5.35.
Inflation
The forecast for this year’s Broad National Consumer Price Index (IPCA) – considered the country’s official inflation – remained at 4.37% in this edition of Focus. For 2025, the inflation estimate is 3.97%. For 2026 and 2027, forecasts are also 3.6% and 3.5%, respectively.
The estimate for 2024 is above the inflation target, but still within tolerance, which must be pursued by the BC. Defined by the National Monetary Council (CMN), the target is 3% for this year, with a tolerance range of 1.5 percentage points up or down. In other words, the lower limit is 1.5% and the upper limit is 4.5%.
From 2025 onwards, the continuous goal system and, thus, the CMN no longer needs to define an inflation target each year. The board set the center of the continuous target at 3%, with a tolerance margin of 1.5 percentage points up or down.
In August, driven mainly by falls in food prices and housing expenses, there was deflation of 0.02% in the country, after the IPCA registered inflation of 0.38% in July. According to IBGE, in 12 months, the IPCA accumulated 4.24%.
Interest rate
To achieve the inflation target, the Central Bank uses as its main instrument the basic interest rate, the Selic, set at 10.75% per year by the Monetary Policy Committee (Copom). The recent rise in the dollar and the uncertainties surrounding inflation made the board raise interest rates for the first time in more than two years, at the last meeting this month.
The last interest rate hike had occurred in August 2022, when the rate rose from 13.25% to 13.75% per year. After spending a year at this level, the rate had six cuts of 0.5 points and one cut of 0.25 points, between August last year and May this year. At the June and July meetings, the Copom decided to maintain the rate at 10.5% per year.
The next Copom meeting is scheduled for November 5th and 6th, when analysts expect a new increase in the basic rate. For the financial market, Selic should end 2024 at 11.75% per year.
By the end of 2025, the estimate is that the basic rate will fall to 10.75% per year. For 2026 and 2027, the forecast is that it will be reduced, again, to 9.5% per year and 9% per year, respectively.
When the Copom increases the basic interest rate, the purpose is to contain heated demand, and this has an impact on prices because higher interest rates make credit more expensive and encourage savings. But, in addition to Selic, banks consider other factors when defining the interest charged to consumers, such as risk of default, profit and administrative expenses. Therefore, higher rates can also make it difficult for the economy to expand.
When the Selic rate is reduced, the tendency is for credit to become cheaper, encouraging production and consumption, reducing control over inflation and stimulating economic activity.
