IPCA-15 is the highest for March since 2015 and goes to 10.79% in 12 months

Driven by food, inflation measured by the IPCA-15 (National Index of Consumer Prices Extended 15) rose by 0.95% in March, reported this Friday (25) the IBGE (Brazilian Institute of Geography and Statistics). It is the biggest change for the month since 2015 (1.24%).

The result was above financial market expectations. Analysts consulted by the Bloomberg agency had expected an increase of 0.85% in the median. In February, the IPCA-15 had registered an even greater increase, of 0.99%.

With the entry of the new data, the index accumulated inflation of 10.79% in 12 months through March. The accumulated was at 10.76% until February.

Food pulls March result

All nine groups of products and services surveyed by the IBGE had price increases in March. The main impact (0.40 percentage point) and the biggest change (1.95%) came from the food and beverage segment. The branch accelerated in relation to the previous month (1.20%).

According to the IBGE, adverse weather factors explain the pressure on consumers’ pocketbooks. Earlier this year, drought in the South and heavy rains in the Southeast affected food production, with repercussions on product supply and prices.

In March, there was an increase in carrots (45.65%), in addition to significant increases in tomatoes (15.46%) and fruits (6.34%). The advances also reached the prices of potatoes (11.81%), chicken eggs (6.53%) and milk (3.41%). On the side of falls, the IBGE highlights chicken pieces (-1.82%), whose prices had already retreated in February (-1.31%).

The group of health and personal care had the second biggest influence (0.16 percentage point) in the IPCA-15 this month. Prices rose 1.30%, after falling in February (-0.02%). The segment’s high in March, says the IBGE, is related to the advance of personal hygiene items (3.98%).

Soon after, the transport group appears, which had an impact of 0.15 percentage points and a rise of 0.68%. Within this segment, gasoline prices, the most important sub-item in the IPCA-15, rose 0.83%.

According to the IBGE, the increase is due to the mega-increase in fuel at refineries on March 11. There were also increases in the prices of diesel oil (4.10%) and vehicular gas (5.89%). Ethanol was the exception, with a drop of 4.70%.

Together, the food and beverage, health and personal care and transport groups accounted for around 75% of the March IPCA-15, according to the IBGE.

The official inflation index in Brazil is the IPCA (National Broad Consumer Price Index), also produced by the institute.

As the IPCA variation is calculated over the reference month, the March data is not yet complete. It will be known on the 8th of April.

The IPCA-15, as it is released earlier, signals a price trend. The leading indicator is usually calculated between the second half of the previous month and the first half of the reference month of the disclosure. In this case, prices were collected in the period from February 12 to March 16, 2022.

In the 12-month period, the IPCA-15 is well above the inflation target pursued by the BC (Central Bank) for the IPCA. The center of the reference measure is 3.50% in 2022. The ceiling was set at 5%.

Market analysts project the target to be exceeded in 2022, which would mean the second consecutive year of non-compliance with the benchmark measure.

The high forecast by the market for the IPCA is 6.59% until December, according to the median of the Focus bulletin, released by the BC.

effects of war

Projections have been revised upwards in recent weeks, amid the economic effects of the war between Russia and Ukraine.

With tensions in Eastern Europe, commodities such as oil rose sharply in the international market, putting pressure on fuel prices in Brazil.

On March 10th, Petrobras announced a mega-increase for gasoline, diesel and cooking gas at refineries. The increase, which took effect the next day, impacted prices at gas stations and gas dealers throughout this month.

Russia’s invasion of Ukraine also puts pressure on agricultural commodities such as wheat, corn and soybeans, and could lead to fertilizer shortages in Brazil. Analysts fear new pass-throughs to final food prices, which would mainly affect the poorest.

In an attempt to curb inflation, the Central Bank has been raising the basic interest rate. This month, the Selic reached 11.75% per year, and the market sees room for new highs.

The median of the Focus indicates a rate of 13% at the end of 2022. The side effect of higher interest rates is to inhibit productive investments in the economy, as credit lines are more expensive in the country.