Friday, April 16, 2021

Market renews expectations for inflation and sees stronger dollar in 2021 – Prime Time Zone

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Analysts heard by the Central Bank estimate an advance of 3.87% in the IPCA and an exchange rate of R $ 5.10

Marcello Casal Jr./Agencia BrasilEntities and economists interviewed by the Central Bank project a new rise in inflation for the eighth consecutive week

The financial market has revised upward expectations for the inflation and dollar in 2021, according to figures published in the Focus Bulletin this Monday, 1st. Economists and entities consulted by the Central Bank estimate that the Broad Consumer Price Index (IPCA) end the year with an advance of 3.87%. This is the eighth bullish revision followed. A week ago, the expectation was 3.82%, while a month ago it reached 3.53%. The new value is above the center of the 3.75% target pursued by the national monetary authority, with a margin to fluctuate between 2.25% and 5.25%. Inflation ended the year 2020 at 4.52% – above market expectations – driven mainly by the increase in food prices. The target for the Central Bank last year was 4%, with a variation of 2.50% and 5.50%.

At the same time, analysts consulted by the national monetary authority see the dollar to R $ 5.10 by the end of this year. This was the second week in a row of revised expectations. A week ago, the forecast was R $ 5.05, while a month ago the projection indicated the dollar at R $ 5.01. The American currency operates in a fall this Monday, quoted at R $ 5.580. Last week, the dollar closed with a high of 1.65%, to R $ 5.605. The currency closed February with an appreciation of R $ 2.39%. In 2021, the dollar has already grown 8.03% against the real. The sources consulted by the Central Bank maintained the expectation of an increase in Gross Domestic Product (GDP) to 3.29%, the same value as last week. A month ago, the projection showed an increase of 3.5%. The value is below that released by the economic team, which expects growth of 3.5% in economic activity this year. For 2020, the Ministry of Economy expects a 4.5% decrease, the biggest drop in GDP since the beginning of the historical series. The value of last year’s index will be revealed this Wednesday, 3, by the Brazilian Institute of Geography and Statistics (IBGE).

The Focus Bulletin shows the freezing of Selic at 4% per year, same value as last week. Economists and entities consulted by the BC estimated an increase to 3.5% a month ago. THE Monetary Policy Committee (Copom) maintained the Selic rate at 2% per year in the first meeting of 2021, a decision already expected by the financial market. The novelty was the withdrawal of foward guidance, as the policy of not increasing interest rates was classified. In a note, the technicians of the BC stated that the conditions for the maintenance of the lowered Selic have already been fulfilled. The message, however, emphasized that the removal of the measure does not mean an automatic increase in the Selic rate in the next meetings. The next Copom meeting will take place between 16 and 17 March.

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