The year 2021 saw some of the biggest inflations of this century. The Broad National Consumer Price Index (IPCA) registered 10.06%. It is the closest thing to an “official” inflation, as it serves the Central Bank’s (BC) inflation targets. Other indices also showed rising prices. The IGP-M, which adjusts rents and some public tariffs, increased 17.78%.
And 2022 started at the same pace. The first index to be released for the current year, the General Price Index – 10 (IGP-10) rose 1.79% in January, informed the Fundação Getulio Vargas (FGV) on Monday (17). In the previous month, the index had fallen 0.14%. With this result, the index accumulates a high of 17.82% in 12 months. According to FGV, “the accelerations observed in the prices of iron ore (from -19.28% to 24.56%) and of soybeans (from -3.41% to 2.92%), items with greater weight in the index to the producer, guided the advance of the IPCA rate, the index with the greatest influence on the IGP-10.”
This indicates that prices are following an accelerated correction path and promising an unpredictable behavior. Why is this happening? The main cause is the adverse international scenario, something that is amplified by domestic problems.
explaining. Much of the Brazilian economy depends on the production and export of agricultural and mineral commodities, such as soy and iron ore. The prices of these products are regulated by the international market. The current situation is one of high liquidity and very low interest rates in the main economies, despite the fact that the United States has already signaled the beginning of a correction.
In addition, there is renewed uncertainty about the impact of the rapidly spreading Omicron variant of the coronavirus that could force the return of restrictive measures, with a heavy and, worse, unpredictable impact on global economic activity.
This is the global situation, with specific effects on the Brazilian economy. Here, in addition to the variation in commodity prices, there is also the influence of oil prices. This product is not on the list of Brazilian exports, but it guides fuel prices in the domestic market, and is also an important component of inflation.
All this causes commodity prices to fluctuate a lot, which puts pressure on price indices. Especially those from the IGP “family”, such as the IGP-M, the IGP-DI and the IGP-10. To compare, an assessment by economist Roberto Troster shows that, in the last 25 years, the IPCA registered an accumulated inflation of 348.9%, while the IGP-M increased by 714.4%, more than double.
According to Troster, the problem is even more serious, because inflation has been unpredictable. “Over the last 25 years, the standard deviation, which is a measure of volatility, of the IGP-M was 0.89, while that of the INPC was 0.44 and that of the IPCA was 0.39,” said Troster.
This must go on. There are no signs of a significant increase in oil production, which promises to keep prices high. The same goes for other commodities. And, to make matters worse, this will be an election year, with the solidity of public accounts under threat, which increases the risk for investors. The immediate reflex is a rise in dollar quotations, which will keep the indices under pressure.
In other words, the best strategy for your money in 2022 is one that provides protection against rising prices and also against the appreciation of the dollar against the real.
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