Quarterly Inflation Report

The Central Bank of Brazil released today the Quarterly Inflation Report. This report analyzes the major risk factors for domestic inflation, including domestic and international economic indicators. In a chapter of this release, the inflation projections for the coming quarters are estimated through econometric models. The Central Bank evaluates two main scenarios. In the first scenario, called the "Reference Scenario", the current values of the Selic interest rate and exchange rate are maintained throughout the period, and were respectively 12% and 1.65. In the second scenario, called "Market Scenario", the model uses the forecast obtained through weekly survey with economists, which shows the exchange rate of 1.60, 1.69 and 1.68 for the end of 2011, 2012 and third quarter of 2013, respectively. The Selic rate used in this scenario was 11.44, 11% and 11% by the end of 2011.2012 and third quarter of 2013.

The result of the analysis shows that inflation will stay above the central target of 4.5% in the market scenario and the reference scenario reaches the center of the target only in the second quarter of 2013. The table below shows inflation developments in the scenarios presented by the Central Bank.



Source: Central Bank of Brazil