IPCA falls again in September, and 12-month inflation stands at 7.17%

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Brazil registered deflation (fall in prices) of 0.29% in September, informed this Tuesday (11) the IBGE (Brazilian Institute of Geography and Statistics). It was the smallest change for the month since the beginning of the historical series.

This is the third consecutive month of decline in the IPCA (Broad Consumer Price Index). The country’s official inflation indicator had fallen by 0.36% in August and 0.68% in July, driven by the reduction in fuel prices.

In the 12-month period, the IPCA recorded an increase. The advance was 7.17% until September. The result signals deceleration compared to August, when the accumulated was higher, 8.73%.

Pressured by the famine in the election year, the Jair Bolsonaro government (PL) bet on tax cuts to mitigate prices. In June, the president sanctioned the law that defined a ceiling for charging ICMS (state tax) on fuel, energy, transport and telecommunications.

One of the reflexes was the drop in gasoline prices, the sub-item with the greatest weight in the composition of the IPCA. Petrobras also started to cut fuel prices at refineries.

Food, on the other hand, continued to rise in the beginning of the second half of the year. High food prices impact above all the pockets of the poorest, who have less financial conditions to face the famine.

Bolsonaro seeks to improve his approval among this share of voters to try to beat former president Luiz Inácio Lula da Silva (PT) in the second round. Lula finished the first round ahead of the current president.

From the ICMS ceiling, analysts reduced the projections for the IPCA in 2022. The most recent estimate of the financial market is a high of 5.71% until December, according to the median of the Focus bulletin, released on Monday ( 10) by the BC (Central Bank).

Even with the loss of strength of the IPCA, Brazil is heading towards bursting the inflation target pursued by the BC for the second consecutive year. The target has a center of 3.50% and a ceiling of 5% in 2022.

The release of the IPCA this Tuesday is the last before the second round of elections, scheduled for October 30th. According to analysts, the index may rise this month, after the stronger effects of the fuel drop.

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