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18/12/2017 - 12:31hs

Inflation estimate from banks down

Brazilian financial market players expect prices to have increased by 2.83% by the end of this year, down from 2.88% as of last week’s forecast.

Brasília - Brazilian financial market players still expect inflation to be lower than the bottom end of the Central Bank’s inflation target range this year. The Extended National Consumer Price Index (IPCA) is now seen ending the year at 2.88%, down from last week’s 2.88% estimate. The information was released online in the Central Bank’s weekly Focus Bulletin, a poll of banks regarding key economic indicators.

The Central Bank works towards 3%-to-6% inflation. If this week’s forecast proves true, this will be the first time that inflation falls short of the target range’s bottom threshold. Inflation exceeded the upper threshold on four occasions – in 2001, 2002, 2003 and 2015. The forecast for 2018 moved down from 4.02% to 4%.

The Brazilian monetary authority relies on the benchmark interest rate (otherwise known as the Selic) as its primary tool in steering inflation towards desired levels. At 7%, the rate is currently at an all-time low, and is expected to remain so in 2018. The Gross Domestic Product (GDP) growth forecast from respondents of the Central Bank poll changed from 0.91% to 0.96% for this year, and from 2.62% to 2.64% in 2018.

*Translated by Gabriel Pomerancblum

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