Brazilian economy’s outlook worsens in market

The latest Focus Report from the Central Bank and investment firms reveals that Brazil’s monetary easing phase is likely over. Market agents do not expect any interest rate cuts in the upcoming policy meeting. Forecasts for the year-end benchmark interest rate, inflation index, and economic growth have all worsened. The Selic rate is projected to remain at 10.5 percent, with inflation expectations revised upward to 3.96 percent.

The recent flooding in Rio Grande do Sul has impacted agricultural output and inflation, while reconstruction efforts are expected to provide an economic boost. However, GDP growth expectations have slightly decreased. The negative report has led to a decline in the Brazilian stock market, reflecting concerns about macroeconomic indicators and fiscal targets.

Investors’ perception of risk in the Brazilian economy has deteriorated, with the country’s 10-year bond yield rising significantly. This trend, coupled with a challenging global environment, has led to the Brazilian real being one of the worst-performing currencies globally.