Government raises inflation expectations in 2022 from 4.7% to 6.5%

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The government cut its forecast for economic growth this year from 2.1% to 1.5% and raised inflation expectations by nearly two percentage points, from 4.7% to 6.5%.

The biggest advance in prices is calculated amid soaring prices of fuel and food commodities, mainly due to the war in Ukraine.

The worst projections for GDP, anticipated by the sheetand for inflation, they are recorded on the eve of the electoral calendar and while President Jair Bolsonaro (PL) demands measures that can stop a possible loss of popularity due to the conditions of the economy.

The Ministry of Economy said that there are risks this year to be monitored, notably the war in Ukraine and its impacts on global value chains, “which already have bottlenecks due to the pandemic”. “Additionally, the risk of the pandemic on economic growth and inflation continues to be evaluated”, says the ministry.

Minister Paulo Guedes (Economy) has barred measures seen as ineffective by him, such as a fuel subsidy program.

Guedes has already publicly admitted that the expectation was for a slowdown in 2022.

One of the factors that contributes to the brake on economic activity is the rise in interest rates. To try to contain inflation, the Central Bank has already raised the basic interest rate (Selic) to 10.75% per year, and new highs are awaited by the market.

The IBGE (Brazilian Institute of Geography and Statistics) released this month that the Brazilian GDP (Gross Domestic Product) grew 4.6% in 2021, after a 3.9% drop caused by the pandemic in 2020.

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