Markets continue to lower inflation projections for the short term

inflation prospects
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Financial analysts once again lowered their year-end inflation estimates. According to the Central Bank’s Focus Report, a weekly survey with top-rated investment firms, the median forecast for official inflation went from 8.27 percent a month ago to 7.3 percent now.

The projections reflect the government’s efforts to keep inflation at bay — notably by forcing fuel taxes down. But as we explained in the latest Brazil Weekly newsletter, the Bolsonaro administration’s moves are considered to be not sustainable and will generate an inflationary whiplash after the October elections. 

Markets increased their inflation projections for next year, from 4.91 to 5.30 percent.

Experts predict that fuel costs and inflation will jolt back towards the end of the year and into 2023. Adding fuel to the fiscal fire, the government has also taken several measures to incentivize public consumption, such as scrapping tariffs on motorcycles and a BRL 41.2 billion (USD 7.7 billion) stimulus and welfare bill.