By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – While there was a consensus among financial analysts that consumer inflation in Brazil would top ten percent this year, the latest report by the Central Bank (CB) shows that analysts’ forecasts for 2016 inflation are also above the target limit of 6.5 percent. According to financial institutions surveyed by the CB for its Focus Report, inflation in 2016 is likely to reach 6.64 percent.

Brazil's Central Bank President, Alexandre Tombini
Brazil’s Central Bank President, Alexandre Tombini, photo by Elza Fiuza/Agencia Brasil.

The Focus Report, released by the Central Bank on Friday shows that forecasts for the 2015 inflation increased for the 10th consecutive time, going from 10.04 percent to 10.33 percent. Now, according to the BC inflation is only expected to fall within the target range in 2017.

This is the first time analysts have forecast inflation above the government target for 2016. If analysts’ forecasts are confirmed for this year and next year, it will be the first time official inflation is registered above the target ceiling for two consecutive years since 2002-2003.

According to the government’s system the center of inflation target is 4.5 percent, with a two percent tolerance in each direction, so that consumer inflation falling anywhere between 2.5 percent and 6.5 percent is considered within the target.

Consumer inflation is one of the indexes taken into consideration by the CB’s Monetary Policy Committee (COPOM), when deciding the benchmark interest rate (SELIC). According to financial analysts surveyed by the CB for the Focus Report, the SELIC which has been increased for the past seven consecutive meetings, is likely to remain stable during the upcoming Committee meeting this week, at 14.25 percent. This will be the last meeting of the COPOM this year.

Other indexes, like the IPCA (Consumer Price Index) in Brazil, rose by 0.82 percent in October, and according to the IBGE (Brazilian Statistics Bureau) it the highest inflation for the month since 2002. In this index the inflation rate now accumulates an increase of 8.52 percent for the first ten months of the year, the highest for the period since 1996.

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