Market predicts inflation of 4.95% for this year

The financial market reduced the inflation forecast for this year for the eighth time. According to a projection by the Focus Bulletin, released this Monday (10th) by the Central Bank, the Extended Consumer Price Index (IPCA) should close this year at 4.95%. A week ago, the market projection was that inflation this year would stay at 4.98%. Four weeks ago, the forecast was 5.42%.

The projection remains above the inflation target for this year, defined by the National Monetary Council (CMN), set at 3.25%, with a tolerance margin of 1.5 percentage points up or down. Thus, the target will be considered formally met if it fluctuates between 1.75% and 4.75%. For 2024, the projection is that the IPCA will remain at 3.92%.

To reach the inflation target, the Central Bank uses the basic interest rate, the Selic, as its main instrument, set at 13.75% per year by the Monetary Policy Committee (Copom). The rate is at its highest level since January 2017, when it was also at that level.

The next Copom meeting is scheduled for the beginning of August. For the financial market, the expectation is that there will be a decrease in the rate. Focus’ projection indicates that the Selic will end the year at 12%. As for 2024, the forecast is that the rate will retreat and end the year at 9.5%.

Published weekly, the Focus Bulletin gathers the projection of more than 100 market institutions for the main economic indicators in the country.

GDP

Regarding the growth of the Gross Domestic Product (GDP, sum of goods and services produced in the country), Focus maintained last week’s forecast of growth of 2.19% for this year. For 2024, the bulletin estimated growth of 1.28%, the same as last week. For 2025, the projection is for a growth of 1.80%.

Exchange

The market maintained the exchange forecast for the third week, with the dollar closing the year at R$5. Four weeks ago, the forecast was that the US currency would remain at R$5.10. For 2024, the projection is that the dollar will be at R$ 5.06, lower than the forecast in the previous week, when the forecast was R$ 5.08. For 2025, the forecast is that the exchange rate will close at R$ 5.15.