Financial market raises expectations for inflation in 2021 and 2022 – Prime Time Zone

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Entities consulted by the Central Bank estimate IPCA at 8.51% at the end of this year, in the 26th consecutive upward revision; for 2022, the projection goes to 4.14%

Luciano Claudino/Code 19/Estadão ContentIncreased inflation forecasts this year contaminate expectations for 2022

O financial market raised expectations for the inflation this year and 2022, second Focus Bulletin released this Monday, 4, by Banco Central (BC). The median for the Broad Consumer Price Index (IPCA), the official gauge of domestic inflation, rose to 8.51% in 2021, compared to a projection of 8.45% last week. This was the 26th edition followed by upward revision. The BC pursues the inflation target of 3.75% this year, with a margin of 1.5 percentage points up or down, that is, between 2.25% and 5.25%. The preview of the IPCA in September was 1.14% — the highest value since 1994 — and accumulated a 10.05% increase in the last 12 months. The consolidated data will be released by the Brazilian Institute of Geography and Statistics (IBGE) this Friday, 8. The constant revision of the IPCA forecast for this year already contaminates expectations for 2022. For next year, analysts estimate a high of 4.14%, up from last week’s forecast of 4.12%. It was the 11th consecutive edition with increased expectations. For 2022, the national monetary authority pursues the 3.5% target, with a variation between 2% and 5%.

Despite the increase in inflation projections, the financial market maintained expectations for the basic interest rate at 8.25% per year in 2021, and 8.5% in 2022. The president of BC, Roberto Campos Neto, once again affirmed last week that the monetary authority will raise the Selic rate as far as necessary to meet the inflation target. O Monetary Policy Committee (Copom) added 1 percentage point to the Selic in September, raising interest rates to 6.25%, and indicated a new high of the same magnitude at the meeting scheduled for the end of this month. Projections for the Gross Domestic Product (GDP) they also did not change. For 2021, the median of the BC survey pointed to a high of 5.04%, while next year should have a performance of 1.57%. The forecast for the 2021 exchange rate was also stable at R$ 5.20. For the end of 2022, the market slightly increased the projection to R$ 5.25, compared to R$ 5.24 last week.