Inflation has been subsiding recently, but much of this improvement was due to government measures and the battle is not yet won, said Central Bank President Roberto Campos Neto at an event on Monday (5).
“There is another improvement that comes with this, but we understand that there is still an element of great concern and the message is that we need to fight this process. Most likely we will go through three months of deflation, but the battle is not won.”
The IPCA-15 (Extended National Consumer Price Index 15) deflated by 0.73% in August, thanks to the impact of reduced ICMS rates on fuel and energy prices. Food and beverages, on the other hand, continued to rise, with an increase of 1.12%.
When participating in a meeting organized by the newspaper Valor Econômico, Campos Neto said that, despite the improvement in the inflationary process, food prices came higher than expected, and repeated that the monetary authority cannot “let its guard down”.
“There is a perception that inflation still has characteristics that inspire care, we have been working to understand what pressure on wages in the service sector can be. Given the improvement in employment in recent months, above expectations, it is still necessary to understand the type of bottleneck that may have with manpower, this will be one of the themes of the new Copom meeting”, he said.
The BC president stated that the estimate is for an unemployment rate close to 8.5% by the end of the year, returning to a positive period in the job market. “It started with low-quality jobs, but we are seeing a reaction. Not only in Brazil, what we are seeing is a structural change in the workforce.”
Campos Neto was also optimistic about the GDP (Gross Domestic Product) for this year, after the country grew 1.2% in the second quarter. He expects further positive revisions to 2022 GDP, with good prospects for Q3 and Q4 results.
Economic analysts slightly raised their forecasts for GDP this year and next, according to the first Focus survey by the Central Bank released after figures showed that the Brazilian economy grew more than expected in the second quarter of the year.
The survey, carried out by the BC with around 100 institutions, also revealed an increase in expectations for the Selic level next year, at the same time that estimates for inflation suffered a small decline.
Analysts expect GDP to grow 2.26% this year and 0.47% in 2023, up from the median of the previous week’s projections of 2.10% and 0.37%, respectively.
He also said that the IMF (International Monetary Fund) growth review points out that almost all countries are showing signs of deterioration – Brazil would be a point out of the curve. The question is whether the synchronized slowdown in the world can occur at the same time as persistent inflation.
Campos Neto also said that the changes in the global geopolitical alignment, after the pandemic and the beginning of the War in Ukraine, could bring opportunities for Brazil, with the Americas needing a place to produce goods, with manpower and capacity to produce large-scale, renewable energy.
“Brazil is the first candidate and it is important to have political and institutional stabilization, so that flows that want to take advantage of these positive factors that the country presents can enter here.”
with Reuters
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