Brazil’s 2021 inflation forecast reaches double digits for first time

For the 33rd week in a row, market analysts increased their inflation projections for this year — taking forecasts for benchmark consumer price index IPCA into the double digits for the first time.

According to the latest Focus Report — a weekly Central Bank survey among top-rated investment firms — inflation estimates for 2021 rose from 9.77 to 10.12 percent. A month ago, the market had expected the index to see out the year at 8.96 percent. For 2022, estimates increased from 4.79 to 4.96 percent in what was the 18th consecutive week of increases.

This forecast was announced just a few days before the government releases figures from the mid-month inflation index IPCA-15 on Thursday.  The IPCA-15 showed spikes of 1.14 and 1.2 percent in September and October, mainly due to rising fuel prices. The index has gone up 8.3 percent since January, and 10.34 percent over the past 12 months. 

Due to inflationary pressure, analysts also raised their forecast for interest rates in the country. Economists consulted by the Central Bank increased their expectations for the benchmark interest rate Selic in 2022, now believing it will end next year at 11.25 percent, above the 11 percent expected in the previous survey.

Finally, the Focus Report brought worsened projections for GDP growth, completing a disappointing triumvirate of forecasts. Markets now expect growth of 4.8 percent for this year (down from 4.88 percent), and 0.7 percent for 2022 (down from 0.93 percent).

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