Focus: with high inflation, market estimates 11% Selic in 2022

With no respite from market expectations for inflation for this and next year, the projection for the basic interest rate, the Selic, for next year advanced to 11% per year. A month ago, the number was still below double digits, at 8.75% pa.

The numbers are from the Focus Bulletin of the Central Bank (BC), released this Monday (8). The document brings together the estimates of more than 100 financial market institutions for the main economic indicators.

For this year, the market maintained estimates that the Selic will close at 9.25% pa. For this, the Monetary Policy Committee (Copom) needs to raise the rate by 1.5 percentage points, leaving the current 7.75% pa. The last meeting of the year takes place in December.

The rise in the Selic expectation occurs amid the advance of inflation estimates. The financial market forecast for the Extended Consumer Price Index (IPCA), the country’s official inflation, reached 9.33% for this year and 4.63% in 2022. A month ago, estimates were at 8.59 % and 4.17%, respectively.

According to the inflation target set by the National Monetary Council (CMN), the IPCA should not exceed 5.25% this year. The target center is 3.75%, however, the 1.5 percentage point tolerance margin up or down allows the index to vary from 2.25% to 5.25%. Selic is the monetary authority’s main tool for controlling inflation.

While expectations for inflation for this and next year advance, projections for economic growth in both periods are falling.

The average of financial agents’ forecasts for the Gross Domestic Product (GDP) 2021 dropped slightly to 4.93%. For 2022, the expected growth is already 1% high in economic activity.