Oil is the commodity that has the most effect on inflation in Brazil, followed by agricultural commodities, according to an analysis by the Central Bank released at the end of last year.
A 10% rise in the price of a barrel of Brent oil has an impact of 0.66 percentage point on the IPCA (Consumer Price Index) after four quarters, according to estimates presented in the last Quarterly Inflation Report.
This year, the barrel has already risen more than 30% and surpassed US$ 100 this Thursday (24), after the invasion of Ukraine by Russia. Part of this movement can be mitigated, however, by the appreciation of the real.
According to the BC, there is a significant effect on administered prices in the first quarter, through oil derivatives (gasoline, bottled gas and diesel).
Even with the fall in the dollar, the price of gasoline in Brazilian refineries continues to lag around 10% in relation to the value on the US Stock Exchange, according to a calculation by Banco Original updated until Wednesday (22).
Other commodity prices negotiated on the international market are also being influenced by the war and could hit inflation in Brazil.
The BC calculates that a 10% rise in the price of agricultural commodities in dollars has a maximum impact of 0.17 percentage point, while a shock of the same magnitude in the price of metallic commodities has a maximum effect of 0.04 percentage point.
Regarding the reaction to these shocks, the BC states that a 10% price increase for all commodities would have an impact of 0.6 point in the first quarter, reaching 0.9 point after one year. A 1-point increase in the basic interest rate would offset only 0.3 point of this increase after 12 months.
“Even with the immediate reaction of monetary policy, the inflationary impact of the cost shock tends to prevail in the short term”, says the BC.
According to the institution’s calculations, interest rate reactions to more intensely counterbalance the short-term effects of the cost shock may generate excessive effects on inflation at a later date.
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