Economy

Brazil's 2021 inflation outlook surges to 4.6%, well beyond central bank target: survey

Brazil's inflation has the tenth rise in a row, and was accompanied by a further increase in the average forecast for official interest rates at the end of this year, by 50 basis points to 4.50%

Photo: REUTERS/Pilar Olivares
  • It was the tenth rise in a row, and was accompanied by a further increase in the average forecast for official interest rates at the end of this year;
  • The average forecast for IPCA consumer price inflation at the end of this year rose from 4.0% a week ago.

Brazil‘s expected inflation for 2021 shot up to a new high of 4.6%, a central bank survey of economists published on Monday showed, significantly above the bank’s year-end target of 3.75%.

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It was the tenth rise in a row, and was accompanied by a further increase in the average forecast for official interest rates at the end of this year, by 50 basis points to 4.50%.

The average forecast for IPCA consumer price inflation at the end of this year rose from 4.0% a week ago, according to the latest weekly “FOCUS” survey of over 100 economists, and comes after figures last week showed inflation in February running at 5.2%.

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The central bank’s official goal this year is 3.75%, with a margin of error of 1.5 percentage point on either side.

The central bank is widely expected to raise interest rates from a record low 2.00% at its policy meeting later this week, which would be the first increase since 2015.

Economists also lowered their end-2021 average forecast for the real to 5.30 per dollar from 5.15 the week before, and next year’s forecast to 5.20 per dollar from 5.13.

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A persistently weak exchange rate, strong global commodity prices and growing concerns over the government’s fiscal position are all pushing inflation expectations higher.

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