Brazil’s inflation is among the highest in the world, report shows

Brazil is close to the top of the ranking of countries that lead the way in world inflation, according to a report released this Tuesday (5th) by the OECD (Organization for Economic Cooperation and Development).

In the list of 19 countries plus the European Union that make up the G20 (group of the 20 largest economies on the planet), only Turkey, Argentina and Russia have inflation above Brazil’s in the 12-month period up to May this year, although the podium occupants boast rates much higher than the national rate.

While the rise in prices in Brazil reached 11.7% in the period, that of Turkey soared 73.5%. Rates in Argentina and Russia reached 60.7% and 17.1%, respectively.

Considering the entire G20 group, accumulated inflation in the period is 8.8%.

In the expanded inflation report for the 38 OECD countries, the consumer price index rose to 9.6% in May, compared to 9.2% in April. This represents the highest inflation in this group since August 1988.

In addition to including part of the main global economic powers, the OECD has among its members countries such as Belgium, Chile, Colombia, Costa Rica and Denmark. Brazil is not in the organization.

Food and energy were reported by the organization as sectors with a relevant contribution to the rise in prices.

In the area covered by the OECD, food inflation reached 12.6% in May, against 11.5% in April. In the case of energy, the cumulative rise in costs reached 35.4%, also in May, up from 32.9% in April.

Economists and market analysts point to two main reasons for the worldwide price spike. The first is related to bottlenecks in the flow of goods and inputs caused by interruptions of activities due to health policies to control infections by the coronavirus.

These stoppages were accompanied by economic stimuli, created with injections of resources into the financial market through asset purchases and interest rate reductions, especially in the United States and Europe.

With the advance of vaccination and the reduction of sanitary restrictions, however, the demand grew beyond the capacity of production and distribution. This generated global inflation caused by low supply.

Russia’s invasion of Ukraine has exacerbated supply problems, especially for grain and, even more, for oil products. War is therefore regularly cited as the secondary reason for the soaring prices.

At the center of the inflationary pressure exacerbated by the conflict in Europe is the US and EU embargo on oil from Russia, one of the main global producers of the raw material.

In addition, the Russians are allies of OPEC, a cartel of producing countries that has already stated several times that it has no intention of accelerating its production to the pace demanded by the West.

Recently, however, the concern about inflation began to share space with the fear of a global recession, resulting in the fall of oil. Brent barrels are down nearly 10% Tuesday, although they are still up more than 30% this year.

To try to curb the highest inflation in the country in 40 years, the Fed (the US central bank) applied a 0.75 percentage point increase in its interest rate in June. That was the highest rise since 1994.

Investors fear that the Fed and other monetary authorities in the main economies will exaggerate the interest rate hike and that this credit restriction will cause the world economy to slow down.