by Camila Moreira
SAO PAULO (Reuters) – Consumer inflation in Brazil ended 2021 above 10%, almost double the target ceiling and at the highest level in six years, under strong influence from fuel prices last year and maintaining pressure on the Central Bank.
The Broad National Consumer Price Index (IPCA) accumulated an advance of 10.06% last year, strongly bursting the ceiling of the official target, which is 3.75% with a tolerance margin of 1.5 percentage points for more or less, according to data released this Tuesday by the Brazilian Institute of Geography and Statistics (IBGE).
The result accumulated last year was the highest since 2015, when the index closed at 10.67%. It was also above the Reuters poll expectation of a 9.97% rise and was still far above the 4.52% high seen in 2020.
With the goal exceeded, the president of the Central Bank, Roberto Campos Neto, will have to write a letter to the Minister of Economy, Paulo Guedes, explaining the reasons why the objective has not been met, the sixth time this has occurred since the creation of the inflation targeting system in 1999.
The last time this happened was in 2017, but on that occasion, the letter had to explain why inflation ended the year below the target floor and not above it.
The year 2021 was marked, as the BC had already highlighted, by cost shocks amid the Covid-19 pandemic, which affected the global supply chain and caused prices to rise around the world.
The Brazilian economy also faced a rise in commodities and a devaluation of the exchange rate, as well as a rise in fuel prices and a water crisis that hit the electricity bills.
VILLAINS
The biggest villain in consumers’ pockets in 2021 was the Transport group, whose prices soared 21.03% mainly due to the 49.02% rise in fuel prices.
“With the successive readjustments at the pumps, gasoline accumulated a high of 47.49% in 2021. Ethanol rose 62.23% and was also influenced by sugar production”, explained the IPCA manager, Pedro Kislanov.
The price of new (16.16%) and used cars (15.05%) also stood out due to the breakdown in the production chain of the automotive sector.
The other main impacts last year came from the accumulated increases of 13.05% in Housing and 7.94% in Food and Beverages. Together, the three groups accounted for about 79% of the 2021 IPCA, according to the IBGE.
In Housing, electricity rose 21.21% last year amid tariff readjustments and an increase in flags. Among foods, ground coffee, with an advance of 50.24%, and refined sugar, with a high of 47.87%, weighed on consumers’ pockets.
DECEMBER
In the last month of 2021, the IPCA showed an increase of 0.73%, from 0.95% in November, but also above the expectation of a rate of 0.65%.
The biggest change was registered by the Clothing group, of 2.06%, but the biggest impact came from the 0.84% rise in Food and Beverages.
The highlights were the increases in the prices of ground coffee (8.24%), fruit (8.60%) and meat (1.38%) in December.
“In the case of meats, in addition to the increase in demand at the end of the year, there was the issue of the Chinese embargo, imposed in September and withdrawn in mid-December,” said Kislanov.
Despite the deceleration of the rise in prices at the end of the year, inflationary pressures continue to weigh on the BC. In its last monetary policy decision, at the beginning of December, the Monetary Policy Committee (Copom) raised the basic interest rate to 9.25% per year.
In the statement, the BC has already indicated an increase again and 1.5 points at the February meeting, taking the rate to 10.75%. The Focus survey shows that experts consulted by the monetary authority see the Selic at 11.75% at the end of this year, with inflation at 5.03%.
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