The Brazilian Central Bank’s economic activity index (IBC-Br), a key indicator for forecasting the country’s GDP, rose 1.4 percent in June, according to LSEG estimates, well above the market consensus of 0.5 percent.

This is the second month of growth in a row, after the increase in April was only 0.01 percent. In 12 months, the IBC-Br index has risen by 1.81 percent.

The IBC-Br index tracks indicators related to monitoring production volumes in agriculture, manufacturing and services, as well as a tax collection index. It is considered a more reliable indicator in the long run.

The June data is in line with forecasts from top-rated investment firms and banks surveyed weekly for the central bank’s Focus Report. The latest median forecast, released last Monday, projects GDP growth of 2.2 percent in 2024, slightly above the 2.11 percent forecast four weeks earlier.

The economic index has been on a downward trend since the second quarter of 2023. Nevertheless, markets are more optimistic about GDP growth than in January, when the median forecast was 1.78 percent.

In addition to more robust growth, analysts have also taken into account concerns about inflation, with the median forecast for the country’s consumer price index in 2024 rising from 4 percent to 4.2 percent last month.

Although expectations for the benchmark interest rate remain stagnant at 10.5 percent, many analysts and non-financial corporate executives expect a rate hike, which could be driven by the deteriorating fiscal situation and a stronger-than-expected labor market. Others believe that a rate cut by the Federal Reserve, expected next month, could ease the pressure and allow the central bank to maintain its current benchmark interest rate.