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Market forecasts, for the first time, inflation below 3% for 2017

Focus Bulletin

By 2018, experts consulted by the Central Bank also positively revised the estimate for inflation and growth

For the fifth consecutive time, economists at financial institutions have slashed their forecast for inflation this year. Data from the Focus Bulletin   released on Monday (25) show that the Broad Consumer Price Index (IPCA), which measures official inflation, fell from 3.08% to 2.97% in 2017.

Facing this, the projection for prices next year fell for the fourth time followed, from 4.12% to 4.08%. The Focus Bulletin is  a weekly publication that gathers the projections of about 100 analysts. 

In Brazil, for prices not to get out of control, a system of inflation target was created, defined by the National Monetary Council (CMN) and pursued by the Central Bank. In 2017, the goal is to leave the IPCA at 4.5%. 

This goal, however, allows room for potential crises and price shocks. That is, in exceptional situations, the IPCA can reach a maximum of 6% and a minimum of 3%. In this way, it is the first time that the financial market projects inflation below the floor established by the IPCA.

GDP

In this scenario, experts once again outlined stronger growth for the economy. This year, the forecast for the Gross Domestic Product (GDP) increased from 0.60% to 0.68%, while for the next year the estimate rose from 2.20% to 2.30%.

The revision of the estimates occurs amid a scenario of falling interest rates and inflation, in addition to GDP growth above expectations. In the second quarter, the economy grew 0.2%  in the face of a surprising increase in household consumption. 

In the quarterly inflation report, the Central Bank also began to expect stronger growth in the economy. In 2018, the projection for GDP went from 0.5% to 0.7%. In 2018, according to the document prepared by the institution, the economy should grow 2.2%. 

Source: Portal Brasil, with information from  the Central Bank