In this last week, economists raised the inflation estimate in 2023 from 5.79% to 5.89%. The financial market information came from the Focus report released by the Central Bank. To reach this conclusion, more than 100 financial institutions were consulted on economic projections.
The central inflation target was set at 3.25% by the National Monetary Council (CMN) and will be met if it fluctuates between 1.75% and 4.75%. The problem is that the higher the inflation rate, the lower the purchasing power of the population, since the prices of products increase without wages accompanying them.
As for 2024, the financial market projection rose from 4% to 4.02%, while the inflation target is 3% and will be considered fulfilled if it oscillates between 1.5% and 4.5%.
And the interest rate?
Very important for the financial market when it comes to the profitability of various assets, the interest rate, the Selic, remained stable at 12.75% per year until the end of 2023. It is worth remembering that it is now at 13.75% per year year.
Furthermore, the Copom has been signaling that interest rates will remain high for a longer period. For 2024, the market projection is that it stays at 10% per year.
What did you gain from inflation in 2022?
Inflation closed the year 2022 at 5.79%, according to the IPCA (Extended Consumer Price Index) released in January. In view of the events of last year, such as the return of economic activity, the war between Russia and Ukraine and the electoral race, the index was not much out of line with expectations.
But, in order to know if your money is really yielding above the index, financial market specialists use the real gain metric, which is done by dividing the investment income by inflation.
When an asset exceeds this index, it means that the money invested has appreciated. If not, it means you haven’t paid enough. For the most part, variable income assets suffered more from instabilities, which justifies the negative yield compared to inflation.
Check here which yielded more than inflation.
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