Adolfo Sachsida, however, points to the reform agenda as a means of bringing the IPCA down; Ministry of Economy admits for the first time that the indicator will break the target ceiling
The resumption of service sector expected for the second half of this year with the advance of immunization against the Covid-19 can impact the increase of inflation, said on Wednesday, 14, the person responsible for the Economic Policy Secretariat (SPE) of the Ministry of Economy, Adolphe Sachsida. “As there is mass vaccination, the service sector resumes. As services resume, you expect a little impact on service inflation,” he said. Despite the increase, the secretary said that the most important thing is to anchor expectations and that the economic reforms proposed by the government should bring the index down. “If we continue to do our homework, we will properly anchor expectations and inflation will continue its downward trend.” The economic team raised the estimate for the Broad Consumer Price Index (IPCA) in 2021 from 5.05% to 5.9%. It is the first time that the Ministry of Economy admits that the official Brazilian inflation meter will exceed the ceiling of the target of 5.25%, with a center of 3.75% and a floor of 2.25%. The IPCA was 8.35% in the 12 months ended in June, when it registered an increase of 0.53%. Services inflation rose by 0.23% last month, compared to a 0.15% decline in May. “Inflation is on the rise everywhere in the world. It is one more reason for us to insist on the economic reform agenda”, said Sachsida.
A services provision grew 1.2% in May compared to April and was once again above the pre-pandemic level, according to data released on Tuesday, 13, by Brazilian Institute of Geography and Statistics (IBGE). The result leaves the sector 0.2% above that registered in February 2020, the last month before the dissemination of Covid-19 in the country. In the year, the segment accumulates high of 7.3% and in the last 12 months it registers retraction of 2.2%. In comparison with May 2020, the provision of services increased 23%, the third consecutive positive rate and the most intense in the historical series started in January 2012. Despite the second positive month and accumulating an increase of 2.5% since April, the segment it has not yet recovered the losses registered in March, when it fell 3.4% due to the reissue of measures of social isolation.
Minister Paulo Guedes’ assistant also said that the government will respect the spending ceiling, the rule that limits public expenditures to the previous year’s budget corrected for inflation. “The Brazilian government is going to spend next year exactly what it spent this year, corrected by the ceiling. We are spending this year’s ceiling and we are going to spend next year’s ceiling, we will no longer spend it,” he said. “It is true that the last government approved the ceiling, but we need to be very clear. More difficult than approving is keeping the ceiling.”