Mira em Foco: the summary of the Focus Bulletin by Professor Mira

Every Monday, at 1:30 pm, Professor Mira, our variable income specialist, makes life on his Instagram to talk about the Focus Bulletin and the market’s expectations for the week. And the mepoupeiras and mepoupeiros who are unable to watch now can see the summary here on the site Me Poupe! 

After all, if there is one thing that is MUST for anyone who wants to get along better with their own money, it is to keep an eye on the news and the latest economic events. 

And, to make your life easier, it will always be EXACTLY on this page that you will find the update of the week. Then you can save the link in your browser and come back every Monday!

Now, I’m going to hand over the keyboard to Mira. Ah, what a hot information party!

 

August 30, 2021

This week’s Focus Bulletin brings an increase in inflation expectations, of 7.27% of the IPCA by the end of this year (a month ago the forecast was 6.79%).

This was already expected and this expectation may still bring higher numbers between now and the end of 2021, as the IPCA-15, which has already been released, serves as a preview of inflation in the next period (August). The IPCA-15 showed an increase in the index (mainly in the transport sectors – driven by the rise in gasoline – and electricity – accentuated by the water crisis.

What worries the market is inflation by the end of 2022, which is forecast at 3.95%, as the inflation target for next year is 3.5%, a percentage below what the Focus Bulletin already forecasts for the IPCA at the end of 2022.

The Selic rate is within all expectations released last week: ending 2021 at 7.5%, and ending 2022, also at 7.5%. When the Copom raises the Selic, it takes about nine months to see the effect on prices and reduce inflation. So, if inflation continues to rise, the Copom will probably continue to make other adjustments to the Selic rate.

Economic growth was reduced, with an expectation of 5.22% (last week the GDP forecast for the end of 2021 was 5.27% and, a month ago, it was 5.30%). This low growth refers more to recovery than to economic growth.

The dollar should reach the end of the year at R$5.15, above the R$5.10 forecast last week; most likely due to the political and institutional crisis, which ends up putting pressure on the fiscal side and driving foreign investors away from Brazil. Without money from the international market in the country, the real depreciates and the dollar appreciates.

 

August 23, 2021

The biggest difference registered in the Focus Bulletin this Monday was in the IPCA (official inflation), whose expectation is to reach the end of this year at 7.11% (last week, the forecast was 7.05%; and a month ago was 6.56%), that is, the forecast for a fall is increasing and getting closer to the current value, which is 8.99%.

About GDP, the market forecast remains stable, with practically the same values: the increase expected a month ago was 5.29%; of 5.28% last week and the expectation for GDP released today for the end of this year is 5.27% in economic growth.

The dollar follows the forecast of R$ 5.10, the same exchange rate as last week. The Selic rate is expected to reach 7.50% by the end of this year, just as the market predicted a week ago.

 

2022

Pro IPCA, the forecast is to reach the end of 2022 with an increase of 3.93% (against 3.90% last week) and the expectation is that the GDP will increase by 2% (last week it was 2.04% ). Dollar and other indicators also follow the same forecast for next year.

 

dollar x political crisis

One thing that reinforces the expectation of an increase in inflation is the dollar, which has been rising a lot in recent days (from R$ 5.40 this Monday), due to the political and institutional crisis, leaving the approval of the reforms sacrificed because of these political climates and anticipation of elections 2022. As the dollar rises, inflation is directly impacted, not counting the increase in electricity, food, and fuel bills.

 

August 16, 2021

This week’s Focus Bulletin brings a new perspective of high pro-IPCA (official inflation), which should reach 7.05% by the end of this year. As the accumulated inflation rate for the last 12 months is at 8.99%, data released last week, the market, which previously believed in a more significant drop in the IPCA, now believes that this drop will be smaller.

GDP is expected to be 5.28% at the end of the year, without much change from the latest forecasts. As for the dollar, the market continues to believe in R$ 5.10.

The expectation of the Selic rate for the end of this year rose to 7.50%, a significant increase compared to a month ago (which was 6.75%). This increase in the Selic rate makes sense, as it comes to contain the rise in inflation, and it also ends up reflecting on the dollar. That’s why we haven’t seen the dollar rise so much. Even with the worsening in the perception of the GDP, the high inflation, and the high Selic, there will probably be a bigger inflow of foreign capital in the country, holding the exchange rate at R$ 5.10.

Next years

Another thing to be highlighted is that the market forecasts, by the end of 2022, the Selic at the same level as at the end of this year (7.50%), but by the end of 2023 and 2024, it should drop to 6.5%.

By the end of 2022, inflation is expected to be close to 4%. The market believed it at 3.75% a month ago and now it is at 3.90%. And the forecast for the coming years is already rising, within the center of the target, to 3.25% in 2023 and 3% in 2024. This shows that the government’s economic policy will have more difficulty controlling this inflation next year, which may be reflected in additional increases in the Selic rate. The Selic may end the year at 7.50%, rise a little more next year, and fall at the end of next year. We don’t know for sure if this will happen, but we have reason to believe it can.

 

August 09, 2021

The increase in the Selic rate, defined by the Copom last August 4th, was already reflected in this week’s Focus Bulletin report. Among the medians, there is a slight advance in the inflation forecast (IPCA), which continues to worry the market. The IPCA, which should reach 6.88% by the end of this year; compared to the 6.79% forecast last week and 6.11% a month ago. Towards the end of 2022, the IPCA expectation also rose from 3.81% to 3.84%, a small advance. In other years (2023 and 2024), the forecast is aligned with the center of the inflation target.

The GDP (Gross Domestic Product) continues with an expected growth of 5.3% for this year ; but for next year it dropped from 2.10% to 2.05%.

Dollar

The dollar continues with the expectation of R$ 5.10 by the end of 2021, registering a drop, if we take into account that today the dollar hit R$ 5.29. This forecast, viewed with suspicion by the Brazilian market, may be confirmed, and the explanation is that, with the country’s political and economic instability, and inflation difficult to be controlled, the forecast is that the Selic rate keeps rising to contain inflation: the expectation is that the Selic will reach the end of the year at 7.25%. The more the government raises the Selic, the more interesting it becomes for foreign investors to invest in fixed income in Brazil. That is, with more foreign money in Brazil, more appreciation of the real against the dollar.

 

August 02, 2021

This week’s Focus Bulletin shows that inflation came “heavy”, consolidating as the data that took off the most from previous expectations. The market believes that the IPCA, which is the official inflation, will reach the end of this year at 6.79%; last week this forecast was 6.56%, and a month ago, 6%. In other words, the market had been a little more optimistic and is now looking at it more realistically, as the accumulated IPCA is currently at more than 8%. Towards the end of 2022, the IPCA expectation showed a small change, from 3.80% to 3.81%.

to keep an eye out

As informed by the President of the Republic to supporters, the intense cold wave of recent days and the frosts compromising plantations could pressure farmers, leading to higher food prices and high inflation, in addition to the water crisis that has generated increases in the bill of light.

GDP and dollar

The GDP brings a forecast of 5.30% in the growth of the economy at the end of this year of 2021; last month the expectation was 5.29%. In 2022, GDP grows 2.10%; and in 2023 and 2024, 2.50%. The dollar forecast rose from R$ 5.09 to R$ 5.10 at the end of 2021; a month ago the market believed that the dollar would reach R$ 5.04 at the end of 2021. It’s not a significant change. In 2022, the forecast is for the dollar to reach R$ 5.20; and at R$5.00 for the end of 2023 and 2024. But with the Presidential Elections next year, everything could change.

Selic rate and investments

The Selic rate maintains the forecast of 7% to end the year. The Copom meeting, which starts tomorrow and runs until Wednesday, should drop the interest rate to 5.25%. Currently, the Selic is at 4.25%. Next year, the market believes that it will remain at 7%, and should only reduce at the end of 2023 and 2024. The main indication, with this week’s meeting, is the increase in the Selic rate to keep inflation down. Most of the market believes in this addition of a point. Among the investments that should increase in value with the rise of the Selic, in fixed income, are all post-fixed investments.

 

July 26, 2021

This Monday’s Focus Bulletin brought some relevant changes, starting with inflation: there is an expectation of an increase in the IPCA, ending the year 2021 at 6.56% (last week, the forecast was 6.31%; and there is one month, 5.97%). What does that mean? That inflation has been increasingly resilient and difficult to be overcome, as the Focus Bulletin has been showing, week by week, significant and consecutive increases in the IPCA.

The GDP also came with a small increase: last week, the market believed that the GDP would reach the end of the year at 5.27%, and this week the forecast is at 5.29%. This is positive and interesting as it is the growth of the economy.

Regarding the exchange rate, the market believes that the exchange rate (the dollar) will reach R$ 5.09 at the end of this year

Selic rate

The main change was the Selic rate, as inflation is proving difficult to fight, the market is expecting a Selic rate, which is our basic interest rate, at 7% at the end of this year. Last week it was 6.75%; a month ago it was 6.5%. It is interesting to see that by the end of 2022, it remains at 7%. In other words, the market believes that this year it is worth throwing the Selic higher to hold inflation, and the forecast is to keep the Selic at the same percentage for the end of next year (7%). At the end of 2023 and the end of 2024, the Selic returns to 6.5%. This movement is for there to be a strong impact, a real shock, for inflation to fall.

Forecast for the coming years

That is why, for 2022, the expectation for the IPCA is 3.80%; for 2023, 3.25%; and for 2024, 3%. It is believed that inflation will fall and the Selic rate will rise, to bring about this fall in inflation. The dollar, at the end of next year, should remain at R$ 5.20; in 2023 and 2024, the market’s expectation will be the US dollar at R$5.00. This increase in the Selic rate should cause more inflows of foreign capital and this also helps to control the dollar, in addition to reducing inflation, which also helps to control the dollar.

 

July 19, 2021

In the median predicted by this week’s Focus Bulletin, the IPCA, which is the official index that measures inflation, should end the year at 6.31%, which is less than the more than 8% we have today. However, a month ago, the market predicted that this index would be at 5.9%. Inflation is proving increasingly resistant, difficult to be fought, and should end the year not as low as we expected. However, for the next few years, forecasts for the IPCA have remained more or less at the same levels for more than a month: 3.75% for the end of 2022; 3.25% at the end of 2023; and 3.06% for the end of 2024

GDP came in at 5.27%, last week was forecast at 5.26%. How is the expected growth of the Brazilian economy? The higher the GDP, the better. This amount is slightly higher than what we had a month ago, which was a forecast of 5% economic growth. This is already helping to recover from the tumble we had last year, with the coronavirus pandemic. 

The dollar remains at R$ 5.05, as it was a week ago, and a little below the R$ 5.10 we had a month ago. For the next few years, the dollar will be at R$ 5.20 in 2022; and BRL 5.00 in 2023 and 2024. In other words, the dollar should be between BRL 5.05/ BRL 5.10/ BRL 5.20 at the end of next year. Today, the dollar rose from R$ 5.20, due to global risk aversion caused by the new variant of the coronavirus. It is worth remembering that when the dollar falls, very close to R$5.00, we have the opportunity to buy dollarized bonds.

Stronger Selic Rate

The Selic rate, which is our basic interest rate, came with the expectation for the end of the year at 6.75%; a month ago the expectation was 6.50% and it was at this level, but this last month the market believes that we will need a higher and stronger Selic, because of the inflation that is up there (IPCA). The market believes that Copom should tighten a little more than previously imagined. For the end of 2022, the market expectation is 7%; 2023, 6.5%; and 2024, 6.5% at the Selic rate.

This means that, for those who have investments in fixed income, paying a lot, at 100% of the CDI and still paying income tax, they are losing out to inflation. It is still a bad scenario for fixed income today because inflation is very high. For the next few years, this is expected to reverse a little, with lower inflation and higher interest rates.

 

July 12, 2021

This week’s Focus Bulletin brings changes in some economic indicators, such as the expectation of inflation, which last week was 6.07% for the end of this year and has now changed to 6.11%. This shows that inflation has been increasing, week by week, and there is a greater expectation of it. However, it is worth remembering that it will end up smaller than it is now, as its accumulated (from the last 12 months) is at 8.35%. So, this value is still below what we currently have and the idea is that inflation will decrease in the coming months. For the year 2022, the inflation expectation dropped from 3.77% to 3.75%; for 2023, it is 3.35%; and for 2024, the market puts inflation at 3.16% (it was 3.25%).

About the GDP, there was an increase in the expectation of the evolution of the Brazilian economy. The economy grew 5.18% last week, and the expectation is now 5.26%. For 2022, it remains at 2.10%; 2023 and 2024, goes to 2.5%.

And the dollar, huh?

The dollar, last week was expected to be 5.04 at the end of the year, and now the dollar should end the year at 5.05. So, it shouldn’t fluctuate much and the market expects it to drop by the end of the year. By the end of 2022, the market expectation for the dollar is 5.22; 2023 and 2024, both at 5.00.

Regarding the Selic rate, there was a change: the market raised expectations for the end of the year from 5.5% to 5.63%. For 2022, last week, the market predicted an increase from 6.5% to 6.75%; and this week, again, the market projects an increase in the Selic, believing that it will reach the end of 2022 at 7%. For 2023, it returns to 6.5%; and for 2024, also: 6.5%.

The possible explanation for this is that the government is probably not very concerned with controlling inflation, letting it run a little longer (see raising the tariff flag), and letting the population pay some of this bill. When prices rise, the government collects more taxes. This boost in public accounts generated, in that year alone, 40 billion more, due to inflation. It is in the government’s interest that inflation help balances the accounts, especially since there is no scenario of overinflation in the country. It’s interesting to understand this: inflation is bad for us, but not so bad for governments.

 

July 5, 2021

This week’s Focus Bulletin brought expectations a little different from what the market had already expected. Among the economic indicators that I highlight today is the IPCA, which is the official inflation index in Brazil. Last week it was expected to end the year at 5.97% and now the forecast is for it to end at 6.07%, a slight variation.

High electricity 

What does this show, Mira? That the market had already put in its expectations the issues of the water crisis and was pricing the entire rise in electricity, with the increase in the tariff flag announced by Aneel (National Electric Energy Agency) last week. As we know, this increase is related to the use of thermoelectric plants, mainly because the reservoirs are very low and hydroelectric production will not meet our needs. The use of thermoelectric plants will impact energy prices, which, in turn, will directly impact inflation! Electricity is present in the chain of all products and affects inflation in general.

There was an increase in the GDP, which is the country’s growth, which was 5.05%, and now the expectation is that it will increase 5.18% this year. It was the indicator that increased the most; a very interesting value. After GDP, we identified that there was a drop in expectations for the dollar, and this is important

Dollar

A few weeks ago, the expectation was 1 dollar = R$ 5.10; a month ago it was $1 = $5.30, and today the expectation has dropped to 1 dollar = R$ 5.04. This indicates that the market believes that at the end of the year, the dollar will be in the range of R$5.00. The dollar has already fallen a lot, I can’t believe it will fall much more, mainly because of the political risks that always surround our economy. If you keep waiting for the best moment to buy the dollar or invest directly abroad, it is worth thinking that the best moment will always be now.

The market projects, in today’s bulletin, the Selic for the end of 2022 at 6.75%, tightening a little more. But in 2023, it would reduce to 6.50%, and in 2024 too: 6.50%. I think it’s quite possible to happen because next year is the year of federal elections and the only certainty we have is that there will be volatility

Projections for 2022

Taking advantage of the projection for next year, the expectation is that inflation will fall from 3.78% to 3.77%; and the dollar remains at R$ 5.20 for the end of next year. The expectation of the IGP-M was at 19.12% and now the expectation is that it will end the year at 18.33%Everyone who is impacted by the IGP-M will have a reduction in their returns, especially next year, as the expectation for the end of 2022 is 4.55%.

 

June 28, 2021

This week, the market projected the IPCA (which is nothing more than inflation) for the end of the year to 5.97%, which is a little more than the previous forecast. However, some economists believe that this may not happen, because today the IPCA is at 8% and there has been no downward movement. And dropping more than two percentage points by the end of the year is a big drop!

On the other hand, the market also maintained its expectation of the Selic Rate for the end of the year at 6.5%. And more: it may have a new increase in July, of 0.75%, and of one percentage point in August. Therefore, as today it is at 4.25%, the expectation is that, in August, it will reach 6% a year.

Finally, this week also starts with a slightly larger projection of GDP growth until the end of the year. Last week it was 5%; in this, it had an increase of 0.05 percentage point. Although this difference is small, it is a good sign! After all, if GDP grows, it is a sign that the economy is also growing.

 

June 21, 2021

The acceleration of the vaccine in some states of Brazil, in addition to the possibility of extending emergency aid until the end of the year, left the market in a good mood this Monday. And when the market gets bullish, projections get better too (but remember, they‘re projections, and they can change at any time! ).

Because of this, the expectation of inflation for the end of the year rose to 5.90, driven by the expectation of an increase in consumption. So, after raising the Selic Rate last week to 4.25% per year, Copom also raised its forecast: now, it is expected to reach 6.5% by the end of the yearIn this post, you can better understand what these Selic rate increases mean for your investments, your debts, and the country’s economy! However, for 2022, inflation is expected to be 3.78.

The expectation on the dollar also improved. The market believes that it may reach R$ 5.10 by the end of the year, which may indicate relief from the pressure that the real is facing for being so undervalued. So, it could also be that inflation will decrease.

Projections for 2022

And, to close this shift in market expectations, GDP is also expected to increase by 5% in 2022, which is a beautiful number! But, it is worth remembering, it is a recovery from the fall caused by the crisis. In the global context, several countries have already started a cycle of economic recovery and this pushes our GDP – and the stock market – up. But there is no miracle: Brazil needs to do its homework in fighting the pandemic.

 

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