Food inflation was still much higher than expected, says Campos Neto

The president of the Central Bank, Roberto Campos Neto, said this Friday (26th) that, despite the improvement in the inflationary process, food inflation came above expectations in the previous indicator for August and that the monetary authority cannot “lower the guard”.

Pulled by the decline in fuel prices, the IPCA-15 (National Index of Consumer Prices 15) had deflation of 0.73% in August. Food and beverages, on the other hand, continued to rise, with an increase of 1.12%. The group recorded the main upward impact on the indicator: 0.24 percentage point.

“We cannot let our guard down, we obviously celebrate the lowest inflation number, but always qualifying that it has a large part of the government’s measures”, said Campos Neto at an event promoted by 1618 Investimentos.

“This latest recent inflation number, for example, [no grupo de] food came much higher than we expected, but we have some inflation components that we expected would slow down more quickly and that are slowing down, but we need to look very carefully”, he continued.

Last Tuesday (23), Campos Neto had said that he projects that Brazil will have two or three months of deflation, driven by the measures implemented by the government, and that the IPCA (National Index of Broad Consumer Prices) will end the year around of 6.5% or maybe a little below that.

The BC president once again emphasized this Friday that Brazil took a step ahead of other countries with the increase in the basic interest rate (Selic) to curb inflation and carried out the process “in a very aggressive way”, but considered that a large part of the The autarchy’s work has not yet had a full effect on the economy, given the 12 to 18 month lag of monetary policy.

“Much of what we did [do trabalho de política monetária] still has no effect on the economy, but we always need to send the message that we are vigilant,” he said.

In early August, the Copom (Monetary Policy Committee) raised the basic interest rate (Selic) by 0.5 percentage point, to 13.75% per year, and said it would assess the need for a new hike of a smaller magnitude. at the next meeting in September.

In order to soften the direct effects of the tax cut measures adopted by the government, the committee emphasized in the last communiqué the 12-month accumulated inflation until the first quarter of 2024.

According to Campos Neto, the BC chose to extend its window of action instead of making “adjusted targets”, as there was more certainty in relation to when than to how much the effect of the measures on inflation would return. He also said that the municipality’s reaction to the changes is to adapt and adjust its performance.

The BC president highlighted that financial market expectations for inflation in 2022 are falling and he expects the same to happen for the estimates for the next two years. “We think that inflation expectations for 2023 and 2024 will be accommodated and will start to fall at some point. But, again, the message is that we cannot let our guard down,” he said.

The Focus survey released by the BC on Monday (22) showed that the financial market has reduced expectations for the IPCA rise this year to 6.82%, compared to 7.02% the previous week.