Inflation is the highest for March in 28 years

Driven by fuel and food, the country’s official inflation index accelerated to 1.62% in March, informed this Friday (8) the IBGE (Brazilian Institute of Geography and Statistics).

It is the highest increase for the month since 1994 (42.75%), before the implementation of the real, show data from the IPCA (Broad Consumer Price Index).

The result came well above the expectations of the financial market. At the median, analysts consulted by the Bloomberg agency projected a rate of 1.35%. In the previous month (February), the IPCA had risen 1.01%.

With the entry of new data, inflation reached 11.30% in the 12-month period up to March. It is the highest level since October 2003 (13.98%). On this basis of comparison, the increase had been 10.54% until February.

Fuels and food pull high

Eight of the nine groups of products and services surveyed had price increases in March. The biggest change (3.02%) and the biggest impact (0.65 percentage point) came from transport.

Then came the food and beverage group. The segment rose 2.42% and accounted for 0.51 percentage point of impact. Together, the two groups contributed around 72% of the IPCA.

The result of transport (3.02%) was influenced, mainly, by the increase in fuel prices (6.70%), especially gasoline (6.95%). This was the sub-item with the highest individual weight (0.44 percentage points) in the monthly index.

March saw the beginning of the economic repercussions of the war between Russia and Ukraine. One of the first impacts of the conflict was the soaring of oil prices on the international market.

The commodity’s advance led Petrobras to promote a mega-increase in fuels, including gasoline, at refineries on March 11.

This was because oil is one of the variables that determine the state-owned fuel price policy. The exchange rate also weighs on the company’s strategy.

On March 11, gasoline rose 18.8% at refineries. Cooking gas, in turn, advanced 16.1%. Diesel oil had an even greater readjustment, of 24.9%, at Petrobras facilities.

The increases quickly reached gas stations and gas resale points across the country, as indicated by the IPCA.

In the case of food and beverages, the increase of 2.42% was mainly due to the prices of food for consumption at home (3.09%). The biggest contribution (0.08 percentage point) was that of tomatoes, whose values ​​rose 27.22% in March.

Carrots advanced 31.47% and accumulated a 166.17% increase in 12 months. The prices of long-life milk (9.34%), soy oil (8.99%), fruit (6.39%) and French bread (2.97%) also rose.

“It was a widespread rise in prices. Several foods suffered inflationary pressure. This happened due to specific issues of each food, mainly climatic factors, but it is also related to the cost of freight. The increase in fuel prices ends up reflecting in other products of the economy , among them, food”, analyzed Pedro Kislanov, IPCA manager.

The war in Eastern Europe also threatens food prices. Agricultural commodities such as wheat, corn and soybeans rose after the conflict began.

What can soften the transfers, according to analysts, is the recent truce of the dollar. In part of April, another possible relief in the IPCA may come from the end of the extra fee on electricity bills.

The end of the water scarcity banner, which made electricity more expensive from September onwards, was brought forward by the government to the 16th.

Even so, the inflation scenario is still fraught with concerns, signal analysts.

“Fuels were readjusted on March 11. So, a third of the effect can still be captured in the April IPCA. This difference will make an arm wrestle with the low energy”, evaluates economist André Braz, from FGV Ibre (Instituto Brazilian Institute of Economics from Fundação Getúlio Vargas).

Possible goal overflow

The IPCA has been in double digits in the 12-month period since September last year. Thus, it is far from the inflation target pursued by the BC (Central Bank).

This year, the center of the benchmark measure is 3.50%. The ceiling is 5%.

According to analysts, the IPCA should break the target again. There are financial institutions that project a rise of more than 7% in the accumulated until December.

If the estimates are confirmed, 2022 will be the second consecutive year of non-compliance with the target. In 2021, the IPCA rose 10.06%.

In an attempt to curb inflation, the Central Bank has been raising the basic interest rate. In March, the Selic rate reached 11.75% per year. The market sees room for an even higher rate.

Persistent inflation pressures President Jair Bolsonaro (PL), who is expected to seek re-election this year and fears the impacts of the electorate’s loss of purchasing power.

Bolsonaro, bothered by the rise in fuel prices, decided to change the command of Petrobras.