Brazil’s official inflation, measured by the IPCA (National Broad Consumer Price Index), slowed to 0.47% in May, informed the IBGE (Brazilian Institute of Geography and Statistics) this Thursday (9).
The variation came below financial market expectations. In the median, analysts consulted by the Bloomberg agency projected a rise of 0.6%.
In April, the immediately preceding month, the IPCA had risen 1.06%, the biggest change for the month since 1996.
With the entry of new data, inflation reached 11.73% in the 12-month period up to May. On this basis of comparison, the high had been 12.13% until April.
The rise in inflation took shape over the course of the pandemic due to a combination of factors.
Among them are the scarcity of inputs, the rise in food and energy prices with adverse weather and the advance of the dollar amid political turmoil in the country.
In the first half of this year, there was the added impact of the Ukrainian War. The conflict caused an increase in oil and agricultural commodities on the international market, which put pressure on fuel and food prices in Brazil.
To try to contain the IPCA, the BC (Central Bank) has been increasing interest rates, which makes it difficult for families to consume and makes productive investments by companies more expensive.
The IPCA has been in double digits in the 12-month period since September last year. Thus, it is heading towards bursting the inflation target pursued by the BC for the second consecutive year.
In 2022, the center of the benchmark measure is 3.50%. The ceiling is 5%.
concern for the government
With the elections approaching, the escalation of inflation became a headache for President Jair Bolsonaro (PL).
The cost of fuel and food is seen by members of Bolsonaro’s campaign as the main obstacle to reelection.
The president, uncomfortable with the situation, announced on Monday (6) a package of measures to try to reduce fuel prices. The initiatives would be valid until the end of the year, but they raise uncertainties in relation to the fiscal impact and depend on the approval of the National Congress.
In a scenario of higher interest rates, economists estimate that inflation tends to decelerate in the 12-month period up to December. However, the outlook is still for a high IPCA.
No wonder, inflation estimates have been revised upwards in recent months. In the median, the financial market projects IPCA of 8.89% until December, according to the most recent edition of the Focus bulletin, released on Monday by the BC.
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