Brazil: Inflation Forescat Goes Slightly South

The market emitted a slightly lower forecast this week for inflation in 2004, compared with last week’s estimate. The projected Broad Consumer Price Index (IPCA) was reduced from 7.37% to 7.34%.

There were also decreases in the estimates for inflation this month (from
0.60% to 0.55%) and for the coming 12 months (from 6.25% to 6.23%). The forecast
for inflation in 2005 remained unchanged at 5.80%.


These figures are part of the weekly survey conducted by the Central Bank
with a hundred financial institutions and market analysts on the outlook for the
chief economic indicators.


This week’s survey also indicates, for example, that the cumulative hike in
public utility rates will reach 8.47% this year, a bit higher than last week’s
projection of 8.45%.


Since mid-August, the Brazilian financial market had been expecting the Broad
Consumer Price Index to fall slightly. 


This switch is mainly a reflection of the more moderate rise in consumer
prices in the capital of São Paulo. So much so that the market’s outlook for
August’s IPCA was maintained at 0.60%, lower than the 0.91% actually registered
in July.


At the same time that inflation shows signs of abating, the figures for
industrial production indicate optimism over growth prospects.


The estimates for foreign direct investments are US$ 10 billion this year and
US$ 13 billion in 2005, according to the Focus Bulletin.


Brazil’s Central Bank, nevertheless, is working with the figure of US$ 12
billion in terms of its expectations for foreign investments in productive
activities until the end of this year.


There was no change in expectations regarding this year’s exchange rate,
which should end the year at R$ 3.10 to the dollar, but the possibility of lower
depreciation is foreseen for the end of 2005, with the previous prediction of R$
3.25 reduced to R$ 3.20.


Agência Brasil
Translator: David
Silberstein

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