Commodity appreciation, high dollar and bottlenecks in the industry put pressure on prices in Brazil; relief is expected only in the second half, when the rate accumulated in 12 months should slow down
The index that measures the official inflation of the Brazilian economy increased again in March, registering an advance of 0.93%, the most expressive increase for the month in six years. In the accumulated 12 months, the Broad Consumer Price Index (IPCA) advanced 6.1%, above the ceiling of the 5.25% target pursued by the central bank, with a 3.75% center and 2.25% floor. The president of the national monetary authority, Roberto Campos Neto, affirmed, hours after the figures were released, that the increase is temporary, but reiterated that it is more persistent than expected. The speech is similar to that of Economy Minister Paulo Guedes, who said in March that the increase is sectoral, but warned of the accelerated pace. For economists and financial market analysts, however, the increase is here to stay, and estimates already point to inflation between 7.5% and 8% in the 12 months accumulated in May and June.
You fuels became the biggest villain of inflation in 2021 after the boom of the oil barrel in the international market with the resumption of global economies in this first quarter. The increase abroad also makes Petrobras readjust prices in the domestic market, since the oil company adopts the international parity policy. The changes made the price of gasoline accumulate 22% increase in this quarter, while diesel adds 18%. The perseverance of the devaluation of the real in dollar, mainly influenced by the flight of investors from the country with the increase in fiscal risk, and the lack of inputs for the national industry due to the imbalance in the production lines complete the triad of factors that brought inflation here, and that should continue to push the index up.
Sergio Vale, chief economist of MB Associados, says that, in addition to the factors already known, the IPCA should suffer in the coming months the strong influence of the increase in medicines after authorization from the federal government to readjust up to 10% since the beginning of this month. – twice as much as allowed in 2020. The 39% increase in natural gas as of May 1 is another pressure that should boost inflation by the end of the first half. “The shocks are coming together and causing the inflationary impact to accelerate,” says he, who expects the IPCA to rise by 7.5% in the accumulated 12-month period between May and June. According to the economist, the persistence of this increase differs from the speeches of authorities about the seasonality of the increase. “Jwe are talking about the pressure that started last year, came to this year, and may end in 2022. It is a shock of three years that runs the risk of being permanent if the Central Bank does nothing, ”he says.
The chief economist at Reag Investimentos, Simone Pasianotto, foresees an even greater increase, of approximately 8% in the 12 months added between May and June. In addition to high oil prices, a stronger dollar and bottlenecks in industrial production, it also cites the commodities agricultural products, such as soy, meat, rice and beans, as a source of pressure on the IPCA. “This scenario of high commodities is not something related to the climate or a regional crisis, it is a structural issue that I do not see as temporary or seasonal”, he says. “It is a situation that will go on for a long time until the pandemic settles globally.” On the other hand, Jean Malta, an economist at Valor Investimentos, believes that the IPCA hits the 7.5% level only in the last quarter, feeling the buoyancy of the accumulated value since the end of last year, when inflation started its upward trend . “Between April and May 2020, inflation was negative, but from September it started to increase. This result in the accumulated series should increase the index ”, he says.
The interest rate is the central bank’s main tool for controlling inflation. In March, the Monetary Policy Committee (Copom) surprised to raise the Selic to 2.75%, the first upward movement in almost six years. According to Campos Neto, the current pace of the IPCA allows the collegiate to repeat the dose of 0.75 percentage points and to drop the interest rate to 3.5% per year in the next meeting, in May. For economists, the change in interest policy will force inflation down, causing the index to end the year at between 5% and 5.2%, touching the target ceiling. “The Central Bank did the correct signaling in March,” says Vale, from MB. For Simone, from Reag, the authorities are attentive to the development of the inflation curve. “The government is already concerned, especially after the start of mobilization on social networks. Gasoline, for example, has already had two price reductions ”, he says.