The official inflation of Brazil, measured by the IPCA (National Index of Prices to the Broad Consumer), rose 0.67% in June, informed this Friday (8) the IBGE (Brazilian Institute of Geography and Statistics).
The variation came below financial market expectations. In the median, analysts consulted by the Bloomberg agency projected a rise of 0.71%. In May, the IPCA had risen 0.47%.
With the entry of new data, inflation reached 11.89% in the 12-month period up to June. On this basis of comparison, the increase had been 11.73% until May.
Escalating inflation has taken shape over the course of the pandemic due to a combination of factors.
There were increases in administered prices, such as fuel and electricity, food shortages and disruption of global industry input chains.
Inflationary pressure in Brazil was intensified by the devaluation of the real amid political turmoil.
In the first half of 2022, the scenario had the additional impact of the Ukrainian War. The conflict put even more pressure on oil and part of agricultural commodities on the international market.
In the midst of this context, Petrobras made adjustments to gasoline and diesel oil at its refineries on June 18, which had an impact on prices throughout the production chain.
The increase made President Jair Bolsonaro (PL) intensify attacks against the state-owned company on the eve of the elections.
Inflation is seen by members of Bolsonaro’s campaign as the main obstacle to re-election.
To try to contain the famine, the government is betting on cuts in federal and state taxes on fuel and other items.
The definition of a ceiling for ICMS (state tax), for example, began to cause a reduction in gasoline prices in the last days of last month.
According to economists, tax cuts bring a downward bias to IPCA projections this year, but there is a risk that the loss of revenues will generate a kind of fiscal bomb, with negative impacts on inflation later on.
The BC (Central Bank) has been increasing interest rates due to rising prices. The side effect is the difficulty in recovering household consumption and companies’ productive investments.
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%.
For now, economists see the index below 10% until December, but still far from the target.
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