From the water crisis to the price of food, the inflation in Brazil it continues without a break. O Broad National Consumer Price Index (IPCA) closed on the high of 0,87%% in the month of August.
The index was released this Friday, 9th, by the Brazilian Institute of Geography and Statistics (IBGE).
The IPCA stayed above of analysts’ expectations in the Focus Bulletin, of the Central Bank, whose latest median pointed to an increase of 0.67% in August.
With the result, the index accumulates growth of 9,68% in the last 12 months. Analysts expect the IPCA to close the year at around 8%, which would be the highest inflation since 2015.
In the year, from January to the end of August, the increase is of 5,67%.
In July, the increase had already been 0.96%, the biggest change for a month of July since 2002.
Even with only eight months of the year accounted for, the IPCA already shows that it will easily exceed the target set for 2021 by the Central Bank.
The center of the goal was 3.75%, with a tolerance of 1.5 points more or less (that is, with a maximum of 5.25%).
The current projection of analysts heard in the latest edition of Focus, published on Monday, 6th, is that the IPCA ends the year up 7.58%.
The projections only get worse with each new edition: four weeks ago, the bet was IPCA at 6.88%. At the beginning of the year, it was just over 3%. This year alone, there were 21 revisions above the IPCA.
For 2022, the Focus median projects IPCA at 3.98%.
Prices that rose the most
In general, factors such as the high dollar, high exports, gasoline prices abroad and the water crisis that affects the price of electricity are among the main fronts that have raised inflation in Brazil since last year.
Some inflation is expected around the world due to the economic recovery, which boosts demand. But Brazil is experiencing a complex scenario, with galloping inflation despite unemployment still very high, above 14%.
Like EXAM showed, Brazilian income has not been able to keep up with rising prices. The minimum wage proposed by the federal government for 2022, of 1,169 reais, should also be below inflation, with a 6.2% readjustment.
Inflation projections continue to rise even though the outlook for the economy has worsened.
The projection for the Gross Domestic Product (GDP) of Brazil in 2022 is already below 1.5% in several analysis houses, and economists are even starting to bet on the possibility of recession next year.
Dollar and energy, price villains
The water crisis that Brazil is going through this winter has made electricity prices take off, one of the main highs of the year.
In addition to the highs so far, Aneel announced a water scarcity tariff flag in the amount of 14.20 reais charged more for each 100 kilowatt-hours consumed, which starts to apply in this month of September.
The risk of blackout also grows due to the Brazilian dependence on hydroelectric plants, which account for more than 60% of the matrix.
“We estimate that the risk of electricity rationing has increased, and we have revised this probability from 5% to 10%. The main risk for the energy scenario next year is a new rainy season (November to March) with precipitation below the historical average “, wrote Itaú bank analysts in a report last week.
At the other end, the dollar is also one of the main responsible for inflation at the moment, and analysts’ projection is that continue at the level of 5 reais for the rest of the year.
The US currency closed on Thursday, 8, up 2.89%, at 5.32 reais, driven by political risk after the actions of President Jair Bolsonaro on 7 September. Political risk remains one of the main catalysts for the rise in the dollar.
The Selic rate is at 5.25% at the moment, but new increases are already taken for granted, with the projection that the interest rate closes the year at 8%.
Signals of higher interest rates in Brazil may attract a greater flow of dollars due to higher returns, and reduce the devaluation of the real. On Thursday, BC president Roberto Campos Neto said that the institution will act to control inflation.
Analysts at BTG Pactual digital bank are betting that the exchange rate will close the year at 5 reais, with projections ranging between 4.80 (in an optimistic projection) and 5.40, but point out that the valuation may change depending on the developments.
“At the domestic level, the existence of an adverse water scenario and persistent and dangerous service inflation is indisputable among economists, who hope that the BCB’s monetary policy committee will [Banco Central] make a firmer statement at this month’s meeting, seeking to accommodate expectations for 2022 inflation,” they wrote in a report on Thursday, 8.
In addition to the impact on production costs in chains that depend on imported inputs – from bread made with imported wheat to inputs used in the field -, the dollar encourages the export of products and, consequently, a reduction in domestic supply.
*Subject under update
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