Brazil’s Central Bank Bets on 4% GDP Growth and 4.3% Inflation

Brazil’s Central Bank (BC) estimates that inflation will amount to around 4.30% in 2006. This is the projection for the Broad Consumer Price Index (IPCA) contained in the quarterly inflation report released by the bank today, June 28.

This estimate is lower than the 4.5% target set by the National Monetary Council (CMN) and higher than the 4.04% forecast made by market analysts in the BC’s most recent Focus bulletin survey, which is conducted on a weekly basis.

The report retains the projection of 4% for this year’s growth in the Gross Domestic Product (GDP), the total of wealth produced in the country. According to the report, the GDP grew 3.4% in the first quarter of this year in comparison with the first quarter of 2005 and 1.4% in comparison to the final quarter of 2005.

According to the BC, the Brazilian economy is increasingly shock-resistant, mainly as a result of the "consistent" decline of inflation, "hefty" trade surpluses (exports minus imports), the generation of "adequate" primary surpluses (what the government saves to pay debt interest expenses), and the reconstitution of international reserve levels, which, according to the report, should present a "substantial improvement."

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