The National Index of Consumer Prices (IPCA), inflation, the country’s official, it should be at 7.3% this year, according to forecast of the Central Bank disclosed this Tuesday (27).
If the estimate is confirmed, it will be the second consecutive year with inflation above the ceiling of the goal pursued by the BC, which is 6.5%. In 2015, inflation stood at 10,67%, the highest rate since 2002.
the Economists of the financial market predict an inflation of 7,25% 2016.
By the system in force in Brazil, the Central Bank has a target for inflation each year. In 2016, the central goal, that is, the focus, is of the IPCA at 4.5%. However, the system provides a “slack”, a floor and a ceiling of two percentage points up or down. In this way, the BC will have met the target if the inflation stay up to 6.5% this year.
However, with the estimated CPI at 7.3%, the BC is predicting that is not going to be able to stick to it. If this happens, the president of the Central Bank, Ilan Goldfajn, will have to write an open letter to the minister of Finance, Henrique Meirelles, explaining the reasons for the overflow of the target.
In the document released on Tuesday, the BC also estimates that inflation should stay closer to the central target of 4.5% in the coming year. To the Gross Domestic Product (GDP), the Central Bank estimates a contraction of 3.3% this year and a high of 1.3% in 2017. <> > > > > See more details below.
Inflation in 2017 and 2018
For the coming year, however, the BC predicted in the inflation report of the third quarter, the inflation, the country’s official should slow down and stay close to the central target for 2017, which is 4.5%.
In the so-called reference scenario, which assumes interest rates stable at the current level of 14,25% per year and exchange rate of R$ 3.30 per dollar, the BC estimated that the IPCA will remain at 4.4% in the coming year.
Already in the market scenario – which uses the projections of the economists of the banks to the currency and interest this year and next (embedding the fall of interest rates), the expectation of the Central Bank for inflation is at 4.9% to 2017.
In the earlier forecast made by the BC, released in June, the estimate was that the IPCA remained between 4.7% and 5.5% in 2017. The financial market expects an inflation 5.07% for the next year.
The Central Bank has also made projections for inflation in 2018. According to them, the IPCA should be between 3,8% (reference scenario, with interest rates and stable exchange) and 4.6% (scenario with estimates of the market for interest and foreign exchange).
Cut interest rates
The fall in inflation projections of the Central Bank, with a greater proximity in relation to the central target of 4.5% next year, it is an indication that the BC may be closer to starting the process of cutting the benchmark interest of the economy.
This is because the decisions of the Monetary Policy Committee (Copom) of the institution, collegial, formed by the directors and the president of BC, are “forward-looking”, that is, they are taken looking at inflation expectations for the coming months.
at This time, the BC is already looking to the scenario of 2017 to make the decision. The financial market believes that interest rates will fall later this year, but still remains a doubt as to whether the cut may happen already at the next meeting of the Copom, in mid-October, or at the last meeting of this year, at the end of November.
With the fall of the IPCA-15 in September, and the disclosure of the new forecasts of BC, the tendency is to increase the chances of a cut in interest rates already in mid-October. Currently, the basic interest rate is 14,25% per year – the highest level in ten years.
“The Copom considers that an easing of monetary conditions [cutting interest rates] will depend on factors that allow the members of the Committee have greater confidence in the achievement of the targets for inflation,” reported the BC in the inflation report on Thursday.
Among the factors that can enable greater confidence in the achievement of goals, according to the BC, is the routing of the tax reforms (the SGP ceiling for spending, already sent to Congress, and reform of Social security, whose proposal will still be disclosed).
“There are positive signs in relation to the referral and the assessment of the tax reforms. However, the process of processing is still at the beginning and the uncertainties regarding the approval and implementation of the necessary adjustments to remain”, according to the BC.
Gross Domestic Product
The inflation report for the first quarter of this year, disclosed this Tuesday (27), the BC forecasts that the Gross Domestic Product (GDP) must “shrink” and 3.3% in 2016 – the same forecast made in June), but expects an expansion of 1.3% for the next year.
If confirmed this scenario, it will be the second retraction of the brazilian economy, which has already plummeted 3.8% in the last year – the biggest fall in 25 years. Two years followed by the recoil of the GDP does not take place since the beginning of the historical series of the IBGE, in 1948.
the GDP is THE sum of all goods and services produced within the country, and serves to measure the behavior of economic activity.
For this year, the financial market estimates a contraction of 3,14% to the GDP and a growth of 1.3% for 2017.
In the second quarter, the brazilian GDP had a fall of 0.6% in comparison with the previous three months. It was the sixth quarter of decline, then of the brazilian GDP.
“The basic scenario of Copom considers stabilization of economic activity in the short term and possible gradual improvement in the coming quarters, in the context of the high level of idleness in the economy,” said the BC.
Components of GDP
About the components of GDP, the BC estimates a decline of 2.2% for the agricultural production this year and an expansion of 3.5% in 2017. Already the industry should have a fall of 3.3% in 2016 and a high of 1.5% in the next year.
at The same time, the services sector is expected to register a contraction of 2.7% this year and growth of 0.9% in 2017. Still according to the Central Bank, by the demand side, household consumption should retreat to 4.4% in 2016, and register an increase of 0.8% in the year to come.
The consumption of the government, in turn, should have a shrinkage of 1.3% in 2016 and a 0.5% growth next year, estimated the Central Bank. Already the so-called “gross fixed capital formation” – the rate of investments should have a decrease of 8.7% in 2016 and an increase of 4% in the coming year.