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Market forecasts inflation and lower interest rates in 2017 and 2018

Focus Bulletin

Projections of analysts consulted by the Central Bank is that the IPCA 2017 ends the year at 3.38%

For the sixth consecutive week, the financial market improved expectations for inflation in 2017. Analysts now bet that the Broad Consumer Price Index (IPCA) will end the year at 3.38%, compared to the previous estimate of 3 , 46%.

As a result, analysts also revised the expectation for the IPCA, which measures official inflation for next year from 4.25% to 4.24%.

The forecasts are part of the Focus Bulletin, a weekly publication that brings together the projections of about 100 analysts. The document is prepared by the Central Bank and released every Monday.

Faced with the persistent decline in inflation, the National Monetary Council (CMN) has revised the inflation target downwards for the coming years. Currently at 4.5%, the inflation target will be 4.25% in 2019 and 4% in 2020.

In June, the IPCA registered a negative change (deflation) for the first time since 2006. In the last 12 months, the accumulated inflation is at 3.00%.

Interest

The main instrument that the Central Bank has to reach the inflation target, the basic interest rate has also been falling in recent months. Analysts now expect the Selic to end the year at 8.25% a year, up from an earlier estimate of 8.50%.

For 2018, the projection for the Selic rate fell from 8.25% a year to 8%.