Focus: Market reduces inflation projection

The financial market revised downwards its inflation projection for the current year. As indicated by the Focus bulletin released by the Central Bank (BC) yesterday, the Broad Consumer Price Index (IPCA) is estimated at 3.72%, slightly below the previous week’s projection, which was 3.73%.

The forecasts contained in Focus are based on analyzes by economists and market analysts consulted by the BC. For the year 2024, these experts also revised their Gross Domestic Product (GDP) growth forecast upwards. Previously, the estimate was for an increase of 2.02%, now projecting a more robust growth of 2.05%.

For subsequent years, projections indicate GDP growth of 2% in 2025, remaining stable in 2026 and 2027.

Inflation

The inflation forecast for 2024 is within the target range established by the Central Bank, which is 3%, with a tolerance margin of 1.5 percentage points up or down. In other words, the target limits are 1.5% and 4.5%, respectively.

As for the economy’s basic interest rate, the Selic, the market projects a rate of 9.63%. Analysts believe that the pace of interest rate declines tends to slow down, in contrast to expectations four weeks ago, when it was predicted that the rate would close the year at 9%.

In the last two meetings, the BC’s Monetary Policy Committee (Copom) reduced the Selic by 0.5 percentage points. However, he indicated that he may not maintain the same pace at the next meeting scheduled for May 7th and 8th.

Exchange

In relation to the dollar, projections indicate that the currency should end the year 2024 quoted at R$5.00, slightly above the forecast four weeks ago, which pointed to R$4.95. For the following years, the forecast is for a gradual increase, reaching R$5.05 in 2025 and remaining at R$5.10 in 2026 and 2027.

(With Agência Brasil).