Financial institutions consulted by the Central Bank (BC) have raised inflation expectations this year and in 2019. The information is published in the Bulletin Focus, published weekly by the BC, with forecasts from financial institutions for the main economic indicators. On the other hand, the projection of the expansion of the Gross Domestic Product (GDP) – the sum of all goods and services produced in the country – was reduced from 1.49% to 1.47% this year.
The estimate for the national consumer price index (IPCA) rose from 4.15% to 4.17% this year. For 2019 the prognosis rose from 4.10% to 4.12%. For 2020 the estimate is 4% and for 2021 it has been adjusted from 3.90% to 3.92%.
For 2018 and 2019, the estimates are below the target center to be pursued by the BC. This year the target center is 4.5%, with a lower limit of 3% and a higher limit of 6%. For 2019 the target is 4.25%, with a tolerance interval of 2.75% and 5.75%. For 2020, the target is 4% and 2021, 3.75%, with a tolerance interval of 1.5 percentage points for the two years (2.5% to 5.5% and 2.25% to 5.25%, respectively).
To reach the inflation target, the CB uses the base rate, the Selic, which currently stands at 6.5% per year.
According to financial institutions, the Selic should remain at 6.5% per year until the end of 2018. By 2019 the expectation is that the basic interest rate will be increased and the period ends at 8% per year.
When the Monetary Policy Committee (Copom) increases the Selic, the goal is to keep the heated demand in check, and this causes price reflections because higher interest rates increase credit and stimulate savings.
When the Copom de Selic lowers, the tendency is that the credit will become cheaper, with incentives for production and consumption, which will reduce inflation control.
Maintaining the base rate, as predicted by the financial market this year, indicates that Copom considers the earlier changes to be sufficient to meet the inflation target.
Economic activity – The projection for the expansion of the Gross Domestic Product (GDP) – the sum of all goods and services produced in the country – has been reduced from 1.49% to 1.47% this year. For 2019, 2020 and 2021, the estimate for GDP growth is 2.5%.
The dollar market forecast for the dollar offer increased from R $ 3.70 to R $ 3.75 at the end of this year and remains R $ 3.70 at the end of 2019.