Inflation Rate May Top Eight Percent in Brazil in 2015

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – Financial analysts have increased forecasts for the annual inflation in Brazil for 2015 to 8.12 percent, according to the latest Focus Survey, released by the Central Bank. The previous survey forecast annual inflation at 7.93 percent. This is the first time this year that inflation forecasts have surpassed the eight percent level.

According to Planning Minister, Nelson Barbosa, the year is just starting and market forecasts are likely to fluctuate more during this period. “Market expectations is sometimes volatile,” Barbosa stated during a press conference on Monday, March 23rd. “The fact that forecasts indicate inflation at this level does not mean inflation will reach these rates.”

Barbosa also stated that the government is working to bring inflation back to the center of the target as soon as possible. Brazil’s government set the country’s inflation target at 4.5 percent per year, with the ceiling rate at 6.5 percent.

According to the analysts surveyed, the surge in inflation is mainly due to government-regulated prices, such as electricity, water, public transportation and fuel prices. If this level of the IPCA (Consumer Inflation Rate) is confirmed it will be the highest inflation rate in Brazil since 2003, when the IPCA registered a rate of 9.3 percent.

The Focus Survey forecasts also continue to show a retraction in the country’s GDP (Gross Domestic Product). Now analysts say economic growth will likely register a decrease of 0.83 percent in 2015, more than the 0.78 percent estimate released last week.

Industrial production expectations, however, did not change, with a forecast of a decline by 2.19 percent by the end of the year. Analysts have also maintained their benchmark interest rate (Selic) forecast for the year at thirteen percent.