Financial market projection for inflation in 2021 it moved even further away from the ceiling of the target pursued by the Central Bank. Financial market economists changed the forecast for the IPCA – the official price index – this year for the 20th time in a row, as per the Market Focus Report, from 7.05% to 7.11%. A month ago, it was at 6.56%. The projection for the index in 2022 rose for the fifth consecutive week, from 3.90% to 3.93%.
The Focus report also brought the projection for the IPCA in 2023, which followed at 3.25%. In the case of 2024, the expectation continued at 3.00%.
Economists’ projection for inflation is well above the 2021 target ceiling of 5.25%. The center of the target for the year is 3.75%, with the margin of tolerance being 1.5 points (from 2.25% to 5.25%). The 2022 target is 3.50%, with a margin of 1.5 points (from 2.00% to 5.00%), while the parameter for 2023 is 3.25% inflation, with a margin of 1. 5 point (from 1.75% to 4.75%).
The inflation target is set by the National Monetary Council (CMN). To achieve it, the Central Bank raises or lowers the economy’s basic interest rate.
In the event that the inflation target is not met, BC president Roberto Campos Neto will have to send an “open letter” to Economy Minister Paulo Guedes, explaining the reasons for the explosion. The last time this happened was in January 2018 and the reason was the non-compliance in another direction, as the inflation of the previous year was below the target floor. Former president Ilan Goldfajn justified, at the time, that the biggest impact on inflation having collapsed in 2017 was the drop in food because of the record harvest.
Market analysts slightly reduced their projections for the Gross Domestic Product (GDP) in 2021 and 2022. The expectation for the economy this year went from a high of 5.28% to an increase of 5.27%. For 2022, the financial market reduced its GDP forecast to advance from 2.04% to 2.00%.
According to the Focus bulletin, the estimate for the Selic, the basic interest rate, at the end of 2021 and also in 2022, continued at 7.50% per year.
In early August, the Monetary Policy Committee (Copom) went up for the fourth consecutive time to Selic and accelerated the pace by increasing it by 1.00 percentage point, to 5.25% per year. At the same time, the collegiate signaled a new increase of the same magnitude for the next meeting, in September.