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Financial market projects inflation of 4.19% in 2017

Focus Bulletin

Analysts cut inflation projections from 4.36% to 4.19% this year. Expectation for GDP in 2018 grows again

The financial market has once again improved projections for the cost of living in Brazil. Analysts' expectation is that inflation will end the year at 4.19%, that is, within the target set by the Central Bank, set at 4.5% (which may vary by 1.5 percentage points upwards or downwards). A week ago, this projection was higher, at 4.36%.

The information is part of the Focus Bulletin, a weekly publication that brings together the projections of about 100 analysts. The Central Bank is responsible for collecting and disseminating the data.

Regarding forecasts for  2018, analysts continue to point out that the Extended Consumer Price Index (IPCA), an indicator of official inflation, is exactly at the center of the BC target.

With the reduction of inflation, experts also set a more optimistic scenario for interest rates in the country. The Selic interest rate is expected to fall more than expected. Until last week, the estimate was that the rate would be at 9.25% per year by the end of 2017; The number has now dropped to 9%.

At the last meeting of the Monetary Policy Committee (Copom), basic interest rates fell from 13% a year to 12.25%. The Central Bank attributed the cut to the best scenario for the cost of living of the Brazilian, in addition to the economic reforms implemented by the federal government. Along these lines, Banco do Brasil, Bradesco and Itaú Unibanco also started offering lower interest rates to companies and individuals.

Higher growth in 2018

Despite a slight reduction in the estimate of the Gross Domestic Product (GDP) this year, the financial market increased the projection for the growth of the Brazilian economy in 2018. According to the median of experts, GDP should grow 2.40%. A week ago, that number was at 2.39%.