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Market’s inflation forecast rises again after 17 weeks

Analysts interviewed by the Central Bank’s weekly Focus Report survey worsened forecasts for year-end inflation in Brazil from 5.60 to 5.61 percent. While the increase was marginal, it was the first in 17 weeks. Regarding 2023 and 2024, inflation projections remained stable at 4.94 and 3.5 percent, respectively.

The IPCA consumer price index has been on a downward trajectory in recent months, mainly due to government measures aimed at reducing prices by capping state-levied taxes on key economic areas such as transport, energy, and communications. This, alongside recent price reduction in fuel rates by oil and gas giant Petrobras, has resulted in the last three months of deflation.

However, since these improvements in consumer prices have been largely anchored in artificial pillars, they are unlikely to be sustainable in the long haul. October’s IPCA-15 mid-month inflation index — and a reliable predictor of official figures — rose 0.16 percent, putting an end to a three-month slowdown streak.

To better understand whether inflation should start rising again this year, however, it will be necessary to wait and see the results of the next IPCA index, which will be released on November 10.

Meanwhile, GDP forecasts held steady at 2.76 percent for this year, breaking two straight weeks of improvement, and grew marginally for the fifth straight week to 0.64 percent. Regarding the benchmark interest rate Selic, it remained at the same level in 2022, 2023, and 2024, at 13.75, 11.25, and 8 percent, respectively.

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