Brasília - Following nearly three months in which forecasts crept up weekly, the financial market now expects the Broad Consumer Price Index (IPCA) to fall slightly. Contrary to last week, when the principal market consultants and analysts predicted that inflation would amount to 7.20% this year, their current estimate reported in the Focus Bulletin puts inflation at 7.16%, which is still far from the government's official target of 5.5%.
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 this month's IPCA was maintained at 0.60%, lower than the 0.91% actually registered in July. On the other hand, the estimate for September's IPCA suffered a slight elevation, from 0.51% last week to 0.55% in the current survey. Inflationary expectations for the next twelve months experienced a small decline, from 6.40% to 6.18%.
At the same time that inflation shows signs of abating, the figures for industrial production indicate optimism over growth prospects; last week's forecast of 5.76% annual growth in industrial production was raised to 5.95%, and growth expectations for this year's Gross Domestic Product (GDP) now stand at 3.92%, in comparison with 3.57% one month ago and 3.79% last week. The projection for GDP growth in 2005 remains unchanged at 3.50%.
The estimates for foreign direct investments continue to be US$ 10 billion this year and US$ 13 billion in 2005, according to the Focus Bulletin. The 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.
The market is more pessimistic, however, over the baseline interest rate (Selic), which is expected to remain at the current annualized level of 16% for the rest of this year.
Agência Brasil
Reporter: Stenio Ribeiro
Translator: David Silberstein
08/17/2004
