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According
to the Central Bank’s September quarterly inflation report, monetary
authorities remain optimistic about the inflation prospects for the
remainder of this year and 2001. According to the report, the
Central Bank forecasts inflation to reach 6.3% this year and to drop to
3.9% in 2001. The external environment, particularly oil prices,
will be the key determinant of the Central Bank’s continued optimism
over the downward trend in inflation and whether to adopt pre-emptive
measures to counter any further adverse supply shocks emerging from rising
oil prices. Consensus Forecast panellists anticipate inflation to
overshoot the Central Bank target marginally but expect the economic
upturn to put increased pressure on prices in 2001. Interest rates,
in turn, are expected to remain unchanged through the end of this year.
External
accounts disappoint. The trade balance is begun showing
some deterioration in September with the accumulated surplus for this year
reaching US$ 714 million, down from US$ 1.0 billion last month. The
current improvement in trade balance - last year’s deficit for the same
period was US$ 774 million - remains below the expectations at the
beginning of this year, since higher than anticipated import growth is
counteracting a more substantial increase in the trade surplus. The
higher than anticipated recovery in domestic economic activity combined
with the hike in the value of oil imports, have led to a stronger import
growth. In September, imports were up 18.8% over the same month last
year. The key driver behind the improvement so far this year has
been strong export growth, which reached 12.8% in September over the same
month last year. In addition to healthy growth in primary product
exports, manufactured export received a strong boost derived from the
increase in regional demand and a more competitive exchange rate.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Brazil. For more details please click here.
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