March inflation was a surprise, says Campos Neto

The president of the Central Bank, Roberto Campos Neto, said this Monday (11) that inflation in Brazil is “very high” and that the IPCA (National Broad Consumer Price Index) in March was a “surprise” for the monetary authority.

Last Friday (8), the IBGE (Brazilian Institute of Geography and Statistics) announced that the country’s official inflation index accelerated to 1.62% in March and reached 11.30% in the 12-month period.

“We had a more recent rate that was a surprise. We were seeing a faster rate of passage of fuel to the pump and, therefore, this next rate would be a little higher and the next [abril] a little smaller. That was part of it, but there were other elements, like clothing and food away from home, that came as a big surprise,” he said.

The rise in the IPCA was driven by the mega-increase in fuel prices and food shortages, economic reflections of the war between Russia and Ukraine.

This was the highest increase for the month of March since 1994 (42.75%), before the implementation of the real. In the 12-month period, it was the second highest increase since 1999, when the inflation targeting system began.

“The reality is that our inflation is very high, the cores are very high. We have communicated with the greatest possible transparency our process of coping with this higher and more persistent inflation”, said the BC president.

In double digits, the IPCA is far from the inflation target pursued by the BC this year. The value set by the CMN (National Monetary Council) for 2022 is 3.5% — with a 1.5 percentage point tolerance up and down.​

If the estimates are confirmed, 2022 will be the second consecutive year of exceeding the target. Inflation ended 2021 at 10.06%, the highest since 2015.

In an attempt to curb inflation, the hike in interest rates has already completed one year in Brazil. On March 16, the Central Bank’s Copom (Economic Policy Committee) raised the Selic (basic rate) by 1 percentage point, from 10.75% to 11.75% per year.

For the next meeting, in May, the collegiate signaled a new high of the same magnitude, already targeting the year 2023.

In March, the BC president had indicated that the next adjustment would be the last increase in interest rates, ending the cycle of monetary tightening with the Selic at 12.75% per year.

According to Campos Neto, the monetary authority “is analyzing the surprise [na inflação] to see if anything changes in the trend”.

“We will look, analyze the factors that are generating these inflationary surprises and will communicate this at a more appropriate time”, he said.