Real appreciation should contribute to lower inflation in 2022, economists predict

After the increase in prices reached 10.42% in 2021, the biggest variation in the last six years, according to the most recent release of the IPCA-15 (previous inflation), the expectation of market economists is for some decompression in price levels to the next year.

Groups with a relevant weight in the composition of the index that come at very high levels have already started to show some important signs of deceleration, such as food, housing and transport, says André Perfeito, chief economist at Necton.

“We will see in the next data an improvement in the margin of the main groups, which does not mean that they are at low levels, far from it”, says Perfeito, who predicts that the cooling of inflationary pressure may help the market’s mood in general. in relation to Brazilian assets.

He adds that some appreciation of the real against the dollar may also contribute to keeping inflation at more well-behaved levels compared to what was observed in most of 2021.

The monetary tightening process underway by the BC (Central Bank), which should take the Selic rate to close to 11.5% according to calculations by the chief economist at Necton, will increase the attractiveness of income on local assets from the perspective of abroad , points out Perfect. He forecasts the real to fluctuate close to R$5.40 over the next year.

In last week’s Focus report, the median of projections by economists consulted by the monetary authority points to a dollar at R$ 5.57 at the end of 2022, with an inflation of 5.03% in the period.

“It’s worth noting that it doesn’t matter so much what level the dollar is at, but how fast it moves. And I think that, from now on, the speed will be more under control,” says the chief economist at Necton.

On Thursday (23), in a session marked by the lowest liquidity at the end of the year, the American currency operated close to stability against the real, quoted at R$ 5.6610 for sale. When it came to rehearse some upward pressure, the BC (Central Bank) entered the market with the announcement of two auctions for the sale of dollars in cash, with the placement of an amount of US$ 965 million (R$ 5.5 billion).

“We believe that most of the impact of the exchange rate depreciation on the IPCA is gone,” says Rafaela Vitória, chief economist at Banco Inter.

Even if it continued to fluctuate close to the current level of R$ 5.70, the impact of the exchange rate on inflation would be residual, around 0.05 percentage point, calculates the specialist.

Banco Inter’s projection, however, points to a strengthening of the Brazilian currency in the next 12 months, with a quotation of R$ 5.50 in December, due to the influence of higher interest rates.

In this sense, the appreciation of the real, says Rafaela, should contribute to the likely decompression to be observed in the price level, especially in the case of gasoline, which is exposed to oil variations in the international market.

“The exchange rate contributed to an additional pressure on inflation, devaluing almost 9% in the year. Fortunately, agricultural commodities in reais seem to be stabilizing and oil in reais is already showing a drop in the post-omicron window, that is, external inflation is not should put pressure on the IPCA in the coming months”, endorses Rafael Ihara, chief economist at Mauá Capital.

Ihara also adds that he is seeing a normalization in the consumption basket with the slowdown of the pandemic, with a reduction in spending on goods and an increase in the consumption of services. This represents a relief for the inflation of goods, which was under severe pressure during the pandemic around the world, says the expert.

“For 2022, we have an estimate of 5% for inflation. Naturally, weaker activity — we project a GDP of 0.5% — represents a downside risk for inflation. In addition, the super grain crop represents a downside risk for our projection for inflation”, says the chief economist of Mauá Capital, who forecasts the currency quotation at R$ 5.60 for 2022.

Rachel Sá, Rico’s chief economics, points out that, although macroeconomic fundamentals indicate greater attraction of capital to the country in the coming year, uncertainties related to the elections will weigh as a contrary force for the exchange rate.

The expert predicts that the dollar will be under intense volatility over the next few months, with political disputes quite present in the daily lives of economic agents, but that, at the end of December 2022, the quotation will be R$ 5.70, close to the level it is currently at.

“More money will come in because of high interest rates, but political uncertainty will drive away part of that capital,” says the expert.