Focus: market raises inflation expectations for 2023 – 02/22/2023 – Market

The market has again raised its projections for Brazilian inflation this year and next, showed the Focus survey by BC (Central Bank) this Wednesday (22), but estimates for the level of basic interest rates remained unchanged for both periods .

The publication of the BC poll, which usually takes place on Monday mornings (21st), was postponed to this Ash Wednesday afternoon due to Carnival.

According to the most recent Focus survey, economists now expect the IPCA to rise 5.89% in 2023, against a rate of 5.79% estimated the previous week. This was the tenth consecutive increase in Brazil’s inflation forecasts for this year, which came after recent pressure from President Luiz Inácio Lula da Silva and allies for an increase in the official inflation target to be pursued by the Central Bank.

For 2024, there was also a slight increase in expectations for the pace of rising prices, to 4.02%, compared to 4.00% in the previous survey. This was the fifth increase followed by the forecast for next year.

The center of the official target for inflation in 2023 is 3.25% and, for 2024, it is 3.00%, always with a tolerance margin of 1.5 percentage points more or less.

Regarding the basic interest rate, analysts consulted by the BC maintained the perspective that the Selic will end this year at 12.75% and the next at 10.00%. In the previous week, economists had raised projections for the basic interest rate for both periods, in the midst of inflationary pressures and the clash between the government and BC over the conduct of monetary policy. Currently, the basic interest rate is 13.75% per annum.

For GDP (Gross Domestic Product), the growth estimate this year improved slightly, to 0.80%, from 0.76% in the previous week. For 2024, it remains at 1.50% for the eighth week in a row.

The projection in Focus for the exchange rate level remained at 5.25 for the end of this year, but dropped to 5.29 for 2024, against 5.30 previously estimated.