Cost of living in Brazil: Brazilian financial market declined, for the eleventh consecutive time, now the country's inflation forecast in 2019 fell from 3.28% to 3.26%

Financial market economists reduce the inflation estimate for this year and also a forecast for the economy's basic interest rates at the end of 2019 – from 4.75% to 4.5% per year. Some analysts believe basic interest rates in Brazil are likely to fall even lower in early 2020.

As the projections appear in the market bulletin known as the report Focus (Relatório Focus), released today (21.10.2019) by the Brazilian Central Bank (BC). The report is the result of a survey conducted last week with more than 100 financial institutions.

According to one institution, financial market analysts have lowered the inflation estimate for this year from 3.28% to 3.26%. It was the first consecutive drop in this indicator.

Brazilian financial market bets on Selic interest rate cuts in Brazil

Interest rate cuts in Brazil are more than priced on curves. Now, after the approval of the first-round Social Security Reform in the Chamber of Deputies, the Brazilian financial market expects the next Copom meeting to decide to cut the basic courses of the Brazilian economy.

Currently, Selic is at 6.5% per year. The Brazilian financial market bets on a cut of at least 0.25%. There are also those who bet on a 0.50% cut.

The Focus Report released today by the Brazilian Central Bank presented a scenario of the Brazilian economy without major changes. According to Focus, there is an upward trend in the exchange rate in Brazil – the projected exchange rate for 2020 remains at R$ 3,90 – which indicates that foreign investors have not yet raised their capital in Brazil.

Brazilian financial market raises GDP projection to 2019 for the first time in 20 weeks

The Focus report, published by the Brazilian Central Bank every Monday, indicates that projections by Brazilian financial market analysts estimate GDP growth to be 0.81% to 0.82% by 2019. The same analysts consulted by the Brazilian Central Bank continue betting on the growth of 2.10% of the Brazilian GDP in 2020.

The change is related to the approval of the first shift of the Pension Reform by the Chamber of Deputies of Brazil. Even so, the performance of the Brazilian economy is still very poor. Many analysts expect the government to present some kind of measure that could warm the Brazilian economy a bit more.

Economists lowered the estimate for the Brazilian official inflation index (IPCA), which was down to 3.78%. A week ago it was at 3.82%. This year's central target is 4.25%, with a tolerance of 1.5 percentage points to more or less.

Many analysts believe that the Central Bank should, at the next Monetary Policy Committee meeting (Copom), which takes place in the last two days of July 2019, should lower the Selic rate of the Brazilian economy that is now at 6, 5% per annum.