SAO PAULO (Reuters) – The financial market raised its interest rate forecast at the end of 2022, after the Central Bank adopted a harsher language when deciding last week to raise the Selic rate again, while inflation expectations got better or stopped getting worse after a long series of highs.
According to the Central Bank’s Focus survey – a weekly survey by the Bacen with financial institutions analysts – released this Monday, the forecast for the basic interest rate of the economy in 2022 rose to 11.50% per year, from 11.25% of the document from the previous week.
On Wednesday, the BC raised the Selic rate by 1.50 percentage points, to 9.25% per year, indicated a new high of the same magnitude for February and highlighted in a statement the importance of the tightening cycle advancing “significantly” in contractionary territory to consolidate the disinflation process and anchor expectations around targets.
The more assertive tone surprised a good part of the market, which came from worse economic activity data. Two days later, IBGE released a lower-than-expected November IPCA with better composition.
The inflation measures projected by analysts for Focus, by the way, have improved.
The expected number for 2021 dropped from 10.18% to 10.05% – the first fall after 35 consecutive weeks of growth. The measure for 2022 remained at 5.02%, not rising after 20 straight weeks on the rise.
The 12-month forecast dropped from 5.36% to 5.21%, while the rate for 2023 dropped from 3.50% to 3.46%. The expected IPCA for 2024 had a slight drop, from 3.10% to 3.09%.
All annual projections from 2021 to 2024, however, remain above the targets for the respective years –3.75%, 3.50%, 3.25% and 3.00%.
In a scenario of still pressured inflation and higher interest rates, the economy suffers. The forecast for GDP growth in 2021 fell for the ninth week in a row, dropping from 4.71% to 4.65%.
The expected rate for 2022 was lower for the tenth week in a row, albeit only slightly – it dropped from 0.51% to 0.50%.
Regarding the exchange rate, the market started to see a higher dollar at the end of 2021 (5.59 reais instead of 5.56 reais), but kept the estimate for the currency at the end of 2022 at 5.55 reais.
(By José de Castro)
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