Analysts finally forecast drop in for Brazil's key rate

Monday, October 17, 2016

Analysts consulted in the Brazilian central bank's weekly survey have reduced their forecasts for the country's benchmark interest rate, known as the Selic, at end-2016 after nine weeks of stability.

The prediction is now that the interest rate will close the year at 13.50% compared to the previous expectation of 13.75%. The forecast for next year remained steady at 11.00%.

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The Selic currently stands at 14.25%. At its last monetary policy committee (Copom) meeting, the central bank decided to leave the rate unchanged for the ninth consecutive time. The next Copom meeting is set to take place this week.

Inflation expectations for both this year and next continue to improve. The consensus prediction for inflation at year-end 2016 is now at 7.01%, down from 7.04% last week and 7.34% last month. For 2017, the forecast was down slightly to 5.04% from 5.06% a week ago and 5.12% a month ago.

Projections for the local currency for both 2016 and 2017 were also left unchanged at 3.25 reais per US dollar and 3.40 reais per US dollar, respectively.

The country's GDP is expected to contract -3.19% this year compared to -3.15% last week and last month. For 2017, the forecast remained steady at 1.30% growth.