Brasília, June 1, 2004 (Agência Brasil) - This week the financial market signaled a small increase in its expectations for this year's inflation, according to a survey of financial analysts and institutions conducted last Friday (28) by the Central Bank.

This information is contained in the weekly Focus Bulletin, released today by the Bank. The forecast for this year's Broad Consumer Price Index (IPCA) rose from last week's 6.36% to 6.50%, distancing itself even more from the government's official target of 5.5%. Predictions for this month's IPCA also rose, from 0.46% to 0.50%, identical to the projected increase in retail prices for June.

According to the report, the other indicators of inflation accompanied the increase. Especially in the wholesale area, in which estimates for the General Price Index - Internal Supply (IGP-DI) rose from 9.42% to 9.58% and those for the General Price Index - Market (IGP-M), from 9.32% to 9.83%.

The market also lifted its forecast for the increase in prices administered or monitored by the government (fuel, electricity, telephone and other services). At the beginning of May, the projection was for a 7.20% hike in 2004. In view of the prediction made two weeks ago by the Monetary Policy Committee (Copom) that residential electricity rates will go up, the market raised its expectation to 7.60%.

There was also an increase in the estimate for the exchange rate at year's end to R$ 3.10 per US dollar, while predictions for the annualized benchmark interest rate (Selic) remained unchanged at 14.50% for 2004 and 13% for 2005.

The other indicators continued stable: a trade surplus of US$ 26 billion; a current accounts surplus of US$ 2.40 billion; and foreign direct investments of US$ 12 billion. The Gross Domestic Product (GDP) is expected, as before, to grow 3.50%, and the ratio between net government debt and the GDP remains 57%.

Reporter: Stênio Ribeiro
Translator: David Silberstein