Brazil will have two or three months of falling prices and inflation will end 2022 around 6.5% or maybe a little lower, said the president of the Central Bank, Roberto Campos Neto, this Tuesday (23).
“When we look at Brazil, [vemos] a high inflationary process. This year, inflation will be around 6.5%, maybe a little lower. We are not celebrating this very intensely, we think there is still a lot of work to be done,” said Campos Neto at an investment event in Santiago, Chile.
The inflation projection of the last Copom (Monetary Policy Committee) for 2022 stood at 6.8%. The Focus survey released by the BC on Monday (22) showed that the financial market has reduced expectations for the rise in the IPCA (National Broad Consumer Price Index) this year to 6.82%, compared to 7.02% last week. previous.
According to the BC president, part of the reduction in inflation is due to the measures implemented by the government. In June, President Jair Bolsonaro (PL) sanctioned the law that set a ceiling of 17% or 18% for charging ICMS on fuel, electricity, transport and telecommunications.
The move is part of the Planalto Palace’s offensive to reduce fuel prices and curb inflation on the eve of the elections. According to the latest Datafolha, in August, Bolsonaro appears in second place in polls, behind former president Luiz Inácio Lula da Silva (PT).
“When we look at the inflation process, we expect two or three months of deflation. We had deflation in the last month, we will probably have another deflation this month. Again, very impacted by the price of energy and measures”, said Campos Neto.
With the impact of the reduction in ICMS rates on fuel and electricity prices, Brazil had deflation (price drop) of 0.68% in July, according to the IBGE (Brazilian Institute of Geography and Statistics).
The fall was concentrated in two groups of products and services surveyed: transport (-4.51%) and housing (-1.05%). Among the increases, the highlight came from food and beverages (1.30%).
The BC president said he sees service inflation still rising, despite seeing “some improvement” in the diffusion index.
Even with the monthly drop, the IPCA remains in double digits in the 12-month period. Until July, the high was 10.07%. The index remains well above the inflation target pursued by the BC this year – 3.5%, with a tolerance margin of 1.5 percentage points upwards or downwards. The monetary authority had already admitted the ceiling burst (5%) for the second consecutive year.
According to Campos Neto, inflation expectations are above the target in several countries. “We have to do our job and follow our mandate, but it’s a difficult process for most central banks,” he said.
At the event, Campos Neto also pointed out that most of the BC’s work has not yet impacted prices, given the lagged effects of monetary policy on the economy. At the beginning of August, the Copom raised the basic interest rate (Selic) by 0.5 percentage point, to 13.75% per year, and said that it will assess the need for a new hike of lesser magnitude at the next meeting.
This Wednesday, the IBGE will publish the IPCA-15 (National Index of Consumer Prices Extended 15) with a preview of August’s inflation. The expectation of the financial market is of a new deflation.
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