Economy

Brazil's inflation projections remain high, market reduces forecast for exchange rate

Brazilian Central Bank survey reduced the projections for the exchange rate in 2020 and 2021

Photo: REUTERS/Ricardo Moraes/File Photo
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  • For the Gross Domestic Product (GDP), the contraction estimate in 2020 improved to 4.40%;
  • The weekly survey of a hundred economists also showed that the basic interest rate should end next year at 3%, without changes.

The market continued to increase expectations for inflation in the Focus survey released by the Brazilian Central Bank on Monday while reducing projections for the exchange rate in 2020 and 2021.

The weekly survey pointed out that the expectation for the rise in the inflation index this year rose to 4.39% from 4.35% in the previous survey, in the 19th week followed by an increase. For 2021, the account rose by 0.03 percentage point, to 3.37%.

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The center of the official 2020 target is 4 percent and, from 2021, 3.75 percent, both with a tolerance margin of 1.5 percentage points more or less.

For the Gross Domestic Product (GDP), the contraction estimate in 2020 improved to 4.40%, against the 4.41% decrease previously forecast. For 2021, the growth forecast decreased by 0.04 points, to 3.46%.

For the exchange rate, the market now sees the dollar at R $ 5.15 at the end of this year, from BRL 5.20 before. For 2021, the expectation is that the US currency will end at BRL 5, from BRL 5.03 before.

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The weekly survey of a hundred economists also showed that the basic interest rate should end next year at 3%, without changes. The Top-5, the group that most correctly forecasts, adjusted its scenario for the Selic interest rate next year to 3%, from 3.13% in the median of the estimates before.

(Translated by LABS)

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