On 7 February 2018 Banco Central announced a new reduction in the discount rate (SELIC), which reaches the historical minimum level of 6.75% per year. The minutes of the meeting indicate a further possible reduction in March, presumably another 0.25%. However, there are signs of an increase in inflation (0.5% in January) and a climate of greater instability in global financial markets that could cause Banco Central to interrupt the SELIC series of cuts.

The possibility of approval of the pension reform is increasingly remote, whose vote is scheduled for the last week of February. The Temer government does not seem to have the strength to amalgamate a solid majority on a very controversial and politically difficult issue. The “hot potato” of pensions will most likely pass to the next president, who will be elected in October. Financial markets, however, seem to have absorbed this news with calm, more attentive and sensitive instead to the oscillations at the international level.

On the economic front, good news comes from the car market and the agri-food sector: motor vehicle exports to Latin American countries increase and a new “super harvest” is expected in 2018, thanks to the regular rains in the most intensely cultivated areas of Brazil.

Let’s see some updated data:

GDP (Value added at market prices)

2012 2013 2014 2015 2016 2017 2018
GDP – real growth (%) 1,8% 2,7% 0,1% -3,9% -3,5% 1,01% 2,80%


The forecast of GDP growth in 2018 is estimated on average at 2.8%, but several economists already see that it can reach 3%.

The International Monetary Fund (IMF) is more pessimistic, with a 1.9% growth: a significant step forward compared to 2017, in any case.


Inflation and real/dollar exchange 

2012 2013 2014 2015 2016 2017 2018
IPCA (IBGE – %) 5,80% 5,90% 6,40% 10,67% 6,29% 2,95% 3,81%


Despite the inflationary tension of January (+ 0.5% at the monthly level), the inflation rate forecast for 2018 is still below 4%, almost the center of the Central Bank goal (between 3 and 6% ).

The good news on agricultural crops tend to cool inflation expectations for 2018.

  2012 2013 2014 2015 2016 2017 2018
Exchange rate R$/US$ (end of the period) 2,04 2,34 2,66 3,90 3,25 3,25 3,30

Without particular fluctuations the real / dollar exchange rate, today at 3.23 and expected to 3.30 at the end of 2018 .

The euro is today quoted at around 4.01 reais, even if the phase of strong strengthening on the dollar at the beginning of January seems to be at an end.


Interest rate

2012 2013 2014 2015 2016 2017 2018
Nominal Interest rate (end of the períod) 7,30% 10,00% 11,80% 14,87% 13,75% 7,00% 6,75%
Real interest (deflactor: IPCA) 2,50% 2,10% 4,20% 2,60% 6,91% 4,05% 2,94%


2018 looks like a year of stability in the discount rate (SELIC), which reached its year-end forecast in February.

Higher economic growth should result in a moderate recovery in inflation and prevent further declines of the SELIC, the central Bank’s main inflation control tool.


The Brazilian stock market (Bovespa)

The Bovespa has experienced moments of euphoria at the beginning of 2018, surpassing the historical maximum in more sessions and achieving 84 thousand points.

The sharp fall of world stock exchanges at the beginning of February reported the Bovespa index below 80 thousand points, but today (19/2/2018) it has again exceeded 84 thousand and is preparing to break the psychological barrier of 85 thousand points.

Only an unpredictable return of inflation or a new instability in world financial markets seem to be able to stop the optimism of financial operators.