RIO DE JANEIRO, BRAZIL – Nearly 30% of economic analysts maintain their forecasts that inflation will be above the target of 3.25% set by the Central Bank’s Monetary Policy Committee (Copom) at the beginning of 2023.
The median of market expectations, released by the monetary authority, remains on target.
But the design of the distribution of expectations is asymmetric, leaning towards higher values instead of the bell shape that would indicate a balance between those who bet on higher and lower values. The average inflation expectation for 2023 is 3.35%.
The distribution of expectations continues with an upward bias despite Copom’s signaling of a higher monetary tightening. From the August meeting on, interest rate hikes will start to influence inflation in early 2023.
On the positive side, expectations have stopped deteriorating. The expectations map is more or less stable in relation to the late July design.
This is a sign that even with the pressure on current inflation, the fiscal policy risks, the institutional crisis, and the uncertainties about next year’s elections, the Central Bank can still maintain some control over market expectations.
This has been possible thanks to higher interest rates. Analysts are now forecasting both higher inflation and higher interest rates. The median projection for interest rates is 7.75% by the end of 2022, but almost half of the private sector economists quote percentages equal to or higher than 8% per year.
In June, this was a hypothesis put forward by less than 10% of the analysts.