The average forecast for IPCA consumer price inflation at the end of the year (2021) rose to 3.60% from 3.50% the week before. Brazil’s central bank weekly FOCUS survey of some 100 economists and financial institutions indicated that the outlook for inflation in the country rose for the fifth consecutive week, and is getting closer to the bank’s target for the year. The highest since last March, and close to the central bank’s end-year goal of 3.75%, with a margin of error of 1.5 percentage point on either side.
Inflation in Brazil, led by a spike in food prices, has proved to be less “transitory” than the central bank had thought. It ended last year at 4.5%, above the central bank’s central target of 4.00%. With inflation expectations converging towards target over the next two years, the bank in January ditched its forward guidance after only five months. Markets then brought forward forecasts for the first interest rate hike since 2015. Average end-2021 and end-2022 rate forecasts were unchanged at 3.50% and 5.00%, respectively. The central bank’s benchmark Selic rate has been at a record low of 2.00%.