After fuel price hike, markets jack up inflation forecasts

jack up inflation forecasts
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Markets increased their year-end inflation forecasts from 5.65 to 6.45 percent, per the Focus Report, a weekly Central Bank survey of top-rated investment firms.

The move comes after February’s IPCA consumer price index was higher than expected at 1.01 percent, taking 12-month inflation to 10.54 percent. To make matters worse, last week, Brazil’s oil and gas giant Petrobras hiked gasoline and diesel prices sold in refineries by 18 and 24.9 percent, respectively.

With inflation accelerating, analysts also estimate that the Selic benchmark interest rate will close the year at 12.75 percent, up from the current 10.75 percent — a half percentage point above last week’s expectations. The Central Bank’s Monetary Policy Committee will set the new rate on Wednesday.

Despite worsening consumer price and interest rate forecasts, the markets improved their GDP growth projection from 0.42 to 0.49 percent.