According to survey, growth will be higher than projected last week
Estimates of economists and financial institutions consulted by the Central Bank (BC) for this year’s GDP rose once again, according to the Focus survey, released every Monday.
In the report released last Monday (30), the growth forecast for 2019 is 1.17%, up from 1.16% forecast last week. For the next year, the projection increased from 2.28% to 2.30%.
Regarding inflation, the estimate for this year’s Extended National Consumer Price Index (IPCA) rose for the eighth time in a row from 3.98% to 4.04% in 2019.
For 2020, the inflation estimate has risen slightly to 3.61% after staying for eight weeks at 3.60%. The forecast for the following years was unchanged, remaining at 3.75% for 2021 and 3.50% for 2022.
The projections for 2019 and 2020 are below the center of the inflation target to be pursued by the Central Bank. The inflation target, set by the National Monetary Council, is 4.25% in 2019, 4% in 2020, 3.75% in 2021 and 3.50% in 2022, with a tolerance range of 1.5 percentage points.
Interest rate
To reach the inflation target, the Central Bank uses as its main instrument the basic interest rate, the Selic, currently set at 4.5% per year by the Monetary Policy Committee (Copom).
According to financial institutions, by the end of 2020, the base rate is expected to be at 4.5% per year as well. For 2021, the institutions estimate that Selic will end the period at 6.38% per year. The previous estimate was 6.25% per year. By the end of 2022, the forecast remains at 6.5% per year.
When the Copom reduces Selic, credit tends to become cheaper, encouraging production and consumption, reducing inflation control and stimulating economic activity.
On the other hand, when the Copom raises the basic interest rate, the objective is to contain the heated demand and this causes price reflexes because higher interest rates increase credit and stimulate savings. The maintenance of the Selic indicates that the Copom considers the previous changes sufficient to reach the inflation target.
Source: Agência Brasil
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