Estimação da Inflação Implícita de Curto Prazo

Gustavo Araujo and José Vicente

No 460, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: Implicit inflation or break-even inflation rate is the difference between nominal and real interest rates. In the Brazilian market, it can be easily obtained from indexed government bonds. However, when dealing with short-term implicit inflation, this task presents two difficulties: a) inflation-indexed bonds have indexation lags; b) inflation seasonality implies real interest rate seasonality. The aim of this paper is to propose a methodology to estimate the short-term implicit inflation that addresses these two issues. Assuming the inflation risk premium for the short run, we evaluate the predictive ability of implicit inflation by confronting it with expectations based on Focus Survey. The results show that the implicit inflation is competitive when compared to market analysts forecasts published in the Focus Survey. An advantage of implicit inflation is that it allows monitoring of expectations better than surveys, since it is continuously updated.

Date: 2017-08
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