Financial Market Forecasts 4.5% Inflation for Brazil in 2006

Brazil’s financial market gives every indication that the Brazilian Broad Consumer Price Index (IPCA) will amount to 4.5% in 2006, in line with the government’s official target, and that it was 0.35% in December, which means a cumulative IPCA of 5.68% in 2005.

This information is part of the Focus bulletin issued today by Brazil’s Central Bank (BC).

The BC’s survey, which is based on interviews conducted every Friday with a hundred market analysts and representatives of financial institutions to detect trends in the major economic indicators, proved accurate in its forecast for inflation in 2005, since the interviews conducted on December 30, 2004, predicted a year-end 2005 IPCA of 5.70%, above the official target of 5.1%, as is now being confirmed.

The rest of the market’s projections for inflation in 2005 were not as accurate. Mainly because the prices that are administered by contract or monitored (fuels, electricity, telephone services, water, sanitation, education, health, and others) rose by more than was expected: 8.80%, rather than 7.09%. The forecast for 2006 is for an increase of 4.50%.

ABr

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