Market analysts have reduced, for third time, expectations of economic activity in Brazil and at the same time, have raised inflation forecasts for this year, according to the Focus bulletin from the Central Bank of Brazil.
According to Focus, inflation is expected to close 2015 at 8.12% and GDP to fall -0.83% over the previous year.
The escalation of the exchange rate is one of the reasons why analysts have revised their estimates of inflation to 8%, although some of them believe that poor activity can decrease the effect on the IPCA, the index measuring the inflation in Brazil. According to the bulletin, the year will close with the US dollar up to 3.15 reais, a much higher value that in 2014, when the exchange rate stood at 2.65 per dollar.
For 2016, the expected increase for IPCA is lighter, from 5.60% to 5.61%; and projections of GDP of 1.20%, 0.3 percentage points below last month’s estimates.
On the other hand, the Selic rate, the benchmark interest rate is expected to end the year at 13% p.a.