Inflation in Brazil in March was 0.71%, a figure below what the financial market predicted (0.77%). The main culprit for the rise in prices was gasoline (which increased by 8.33%), mainly due to the return of federal fuel taxes. Former President Jair Bolsonaro withdrew the tax to artificially reduce inflation last year, a few months before the elections. Looking at the photo a little wider, it can be seen that inflation is slowing down: in the last 12 months it was 4.65%, compared to 5.6% in the previous 12 months. Such a low percentage was not recorded for that period since January 2021.
The slowdown in price increases is good news for the government of Luiz Inácio Lula da Silva, especially because it reinforces his argument against the Central Bank, which he accuses of exaggerating in the strategy to contain prices, setting the interest rate at 13.75%.
This has been one of the main thorns in the side of President Lula in his first 100 days in office. The leftist leader accuses the Central Bank (which dictates monetary policy autonomously) of boycotting Brazil’s growth possibilities. “I continue to think that they are playing with the country; playing, above all, with the poor people, and above all with businessmen who want to invest, only those who do not want to see it do not see it, ”Lula criticized Monday at the commemoration of the 100 days of his mandate.
For analysts, the inflation data published by the Brazilian Institute of Geography and Statistics (IBGE) is favorable, but not enough for the Central Bank to reconsider its controversial current price of money. The chief economist for emerging markets of the English firm Capital Economics, William Jackson, stressed that the fall in consumer prices was driven by a sharp drop in food inflation, but qualified: “Core inflation remains high, and is he expects the headline inflation rate to rise again next quarter.” The analyst added: “As a result, we doubt that this reading will make the Central Bank’s Monetary Policy Committee move away from the aggressive line held at its last meeting.”
Overall, data released Tuesday suggests that price pressures continued to ease somewhat in March, although core and services inflation remained high, said Luciano Rostagno, a market strategist at Brazil’s Banco Mizuho. “It is important to highlight that, although the base effects will continue to push annual inflation down in the coming months, the trend will quickly reverse in the second half of the year,” said the specialist.
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