Friday, March 5, 2021

Market sees weaker GDP and renews advances for inflation and dollar in 2021 – Prime Time Zone

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Analysts surveyed by the Central Bank estimate an advance of 3.82% in the IPCA and 4% in the basic interest rate; projection for economic recovery drops to 3.29%

THE financial market adopted a more pessimistic tone for the Brazilian economy by reducing the projection of Gross Domestic Product (GDP), and revise upward expectations for the dollar, inflation e Selic rate in 2021. According to a number released by Focus Bulletin this Monday, 22, economists and entities consulted by the central bank estimate economic activity to grow 3.29% this year, compared to a projection of 3.43% last week, and 3.49% a month ago. The figure is below that released by the Ministry of Economy, which expects an advance of 3.5% of GDP this year. At the same time, the sources of the monetary authority see room for further inflationary pressure. The estimate for the Broad Consumer Price Index (IPCA), the official indicator of Brazilian inflation, is 3.82%. This is the seventh upward revision followed. In the previous publication, the forecast was 3.62%, while a month ago it registered an increase of 3.5%. 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%.

The Focus Bulletin also reveals a new increase in Selic, the main instrument of the central bank for controlling inflation. The expectation is that the basic interest rate of the Brazilian economy will end the year at 4%, above the 3.75% forecast a week ago, and 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 BC technicians 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. Market analysts predict that the basic interest rate will begin to change at the next collegiate meeting, between 16 and 17 March. The sources heard by the Central Bank are also more cautious with the exchange rate. The Focus Bulletin shows an advance forecast for R $ 5.05 in 2021, compared to an estimate of R $ 5.01 last week, and R $ 5 a month ago.

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Market sees weaker GDP and renews advances for inflation and dollar in 2021 - Prime Time Zone