Survey: Brazil’s 2020 Inflation Outlook Rises to 3 Percent, Spiked by Food Prices

RIO DE JANEIRO, BRAZIL – Brazil’s 2020 inflation outlook rose to 3 percent, a central bank survey showed on Monday, the 11th week in a row it has risen as a recent spike in food prices continues to intensify short-term inflation pressures.

It is the first time since March that the central bank’s regular ‘FOCUS’ survey of around 100 economists has pegged inflation this year at 3 percent, although that remains well below the bank’s official 2020 goal of 4 percent.

The survey also showed that this trend could force the central bank to tighten policy more than previously expected. Economists now see the bank’s benchmark Selic rate ending next year at 2.75 percent, up from the 2.50 percent predicted last week.

The central bank is widely expected to keep the Selic rate on hold at a record low 2 percent later this week. The ‘FOCUS’ survey showed the average 2021 inflation outlook ticking up to 3.1 percent from 3 percent, again still below the bank’s 3.75 percent target.

The economic outlook brightened, the survey showed, with an average forecast for a 4.8 percent fall in gross domestic product this year, the least pessimistic since May and close to the government’s forecast for a 4.7 percent contraction.

A senior ministry official said last week that forecast will be revised in early November, and Economy Minister Paulo Guedes said he now expects the GDP decline this year to be around 4 percent.

That would still represent the steepest annual downturn on record, but it is a notable improvement from the consensus for a fall closer to around 7 percent earlier this year during the depths of the anti-coronavirus social isolation and lockdown measures.