Market reduces forecasts for inflation in 2022 and raises it to GDP, shows Bulletin Focus

For the third consecutive week, financial market analysts raised their forecast for this year’s economic growth and lowered expectations for inflation.

The estimate for the IPCA (Broad Consumer Price Index), which measures official inflation, went from 7.67% to 7.54% this year. On the other hand, the forecast for 2023 increased from 5.09% to 5.20%. This was the 15th consecutive increase.

The numbers are from the Focus Bulletin of the Central Bank (BC), published this Monday (18). The document gathers the estimates of more than 100 financial market institutions for the main economic indicators.

The estimate of economic growth for 2022 advanced to 1.75%, up from 1.59% last week and 1.5% a month ago. The number is close to the 2% increase expected by the federal government’s economic team for this year’s Gross Domestic Product (GDP).

The market maintained its expectation of a 0.5% increase in GDP for 2023, the same projection as four weeks ago.

Inflation projections for both years, 2022 and 2023, are above the center of the target defined by the National Monetary Council (CMN), respectively of 3.5% and 3.25%. As already admitted by the BC, this should be the second year of breaking the upper limit of the inflation target, which in 2022 should not exceed 5%.

If expectations are confirmed, 2023 inflation will also break the ceiling of next year’s target, set at 4.75%.

Analysts kept forecasts for the basic interest rate at 13.75% per year in 2022 but raised expectations for 2023 from 10.50% per year to 10.75% per year. The Selic is the Central Bank’s main tool to control inflationary pressure.