The Central Bank’s Focus Report reduced both expectations for inflation and GDP while the forecast for rate cuts remain constant.
Economist and financial institutions surveyed by the Central Bank of Brazil lowered expectations for inflation in 2017 and 2018.
According to the Focus Report released this morning, the market forecasts for the Extended Consumer Price Index (known as the IPCA) will reach 4.06% this year, as opposed to the previous estimate of 4.09% – the sixth consecutive decrease. By the end of 2018, inflation is projected at 4.39% in contrast to the 4.46% pencilled in last week.
The market slightly reduced expectations for Gross Domestic Product (GDP) in 2017, from 0.41% to 0.4%. Four weeks ago, Brazilian economic activity was forecast to grow 0.48% this year, but the projection has been trimmed in recent reports. By 2018, growth of 2.5% for GDP is expected.
As for the interest rate, the market maintained its forecasts of last week. By 2017, the market expects the Selic to close at 8.5% per year; this is expected to remain at the same level throughout 2018 closing the year at 8.5% also.