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Market Anticipating Higher Inflation in Brazil

In Brazil, the expectations of the financial market regarding inflation are increasingly pessimistic and suggest that the Broad Consumer Price Index (IPCA) will end the year at 7.37%, versus last week’s estimate of 7.29%.

This forecast is growing gradually more distant from this year’s inflation target of 5.5% and closer to the upper limit of the tolerance interval, which permits a maximum variation of 2.5% in either direction.

This is one of the results of this week’s Focus Bulletin, distributed today by the Central Bank and based on a weekly survey of one hundred financial institutions and market analysts to define trends in the chief financial market indicators.


The study also shows that the outlook for next year’s inflation has also deteriorated, with the analysts indicating 5.70%, compared to the official target of 4.5%.

These figures, however, are pegged to retail business activity. The forecasts for wholesale inflation are even more disturbing.


The General Price Index””Internal Supply (IGP-DI) is expected to show an overall annual increase of 12.23%, compared with last week’s estimate of 11.62%, and projections for the General Price Index””Market (IGP-M) rose from 12.11% to 12.47% over the same period.


As for 2005, the predictions for both indexes remain unchanged at 6.50%.

As for inflation in September, the results of the Focus Bulletin survey continue to indicate 0.60%. For next month, the prediction is for the IPCA to fall to 0.45%, in consequence of the declining curve of the Consumer Price Index compiled by the Economic Research Institute Foundation (IPC-Fipe) for the São Paulo market.


The IPC-Fipe is expected to attain 0.55% this month and end the year with a cumulative growth of 6.59% (5.20% in 2005).

The projected inflation for the next twelve months was reduced from 6.28% to 6.19% for the IPCA and raised from 5.72% to 5.73% for the IPC-Fipe, 6.99% to 7.08% for the IGP-DI, and 6.97% to 7.48% for the IGP-M.

Agência Brasil
Reporter: Stênio Ribeiro
Translator: David Silberstein

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