RIO DE JANEIRO, BRAZIL – Fnancial market agents continued to increase their forecasts for inflation this year to 8% and 2022, to 4.03%. The numbers are in the weekly Focus report, which gathers market expectations, released by the Central Bank (BC) on Monday.
Last week, the median in the market was of a high of 7.58% for this year and 3.98% for next year. Expectations have been rising week after week due to several uncertainties that the market sees ahead, such as the water crisis, the issue of precatórios (federal court-ordered debts), and the continued inflationary pressure shown by the IBGE.
For 2021, the official inflation target is 3.75%, with a tolerance interval of 1.5 percentage points (p.p) up or down. That is, 8% inflation would exceed the ceiling of this target.
For next year, the target is 3.5%, which keeps the projections within the tolerance range. The president of the Central Bank, Roberto Campos Neto, has said that he will do whatever is necessary to bring inflation within the target.
In the opposite direction of inflation, expectations for the country’s growth in 2021 fell for the fifth week in a row. The market expects a GDP rise of 5.04% against a growth rate of 5.28% expected a month ago.
However, it is necessary to consider the statistical loading of the GDP, calculated at 4.87% by Goldman Sachs bank. This figure is the effect of the comparison with last year’s sharp fall in GDP.
Last week, Economy Minister Paulo Guedes acknowledged that the “political noise” affects the economy and may slow down the country’s growth. According to him, President Jair Bolsonaro “may have exceeded himself in words, but not in actions” on September 7.
For 2022, the movement is also of downward revision. The current projection is for growth of 1.72%. Four weeks ago, it was 2.04%.
The expectations for the basic interest rate, the Selic, and the exchange rate have also been rising. A month ago, the market expected the Selic to be 7.5% this year and in 2022. The projection has risen to 8% in both years.
The Selic is now at 5.25% a year, and the Central Bank has already signaled that it will raise the rate by one percentage point in the next meeting, which takes place next week.
The exchange rate expected for the end of the year is R$5.20, compared to R$5.10 four weeks ago. Currently, the dollar is trading around R$5.21.