By Jessica Bahia Melo
Investing.com – The recovery of the world economy, after the recession caused by the covid-19 pandemic, generated an increase in prices in several countries, including Brazil, which is on the same level as India and Russia, with intense variations in prices. In addition to the heating of the market, which generated a widespread increase in CPIs around the world, countries must face a process of “green inflation”, according to Roberto Campos Neto, president of the Central Bank of Brazil. During the panel “Perspectives and challenges of the economy and monetary policy in Brazil”, held during the Expert XP virtual event, Campos Neto stated that the demand for materials used by clean technologies has increased, and the fight against climate change has affected the inflation – influencing metal prices and adaptations in the production of various items.
“For you to achieve this greener growth, there is a much greater demand for some metals. Remembering that for part of these metals, production is not a very green process, especially aluminum. So we watch with concern news of copper mine closures, changes in the way aluminum is made to be more sustainable. This reduces production and increases costs”, explains Campos Neto.
Factors that should pressure inflation
In addition to the heating up of demand in general with the economic measures made possible by emerging and also developed countries, one of the points that Campos Neto’s attention is drawn to is the real estate market. “The United States has had a very high house price increase, but this has not been accompanied by rents until recently. When we look at the expected rental prices ahead, we see that a very relevant increase is already forecast and this will spread”, highlights Neto.
In Brazil, the water crisis should continue to be a pressure in the coming months. Still, bottlenecks in sectors such as semiconductors also worsen the scenario. “And then we actually have a little longer wait. But if we look at production, there was a very big drop in one or two months, but for most of the pandemic, it only increased. So there may have been a break, but I think it’s more of a demand issue. The part of international freight, both volume and costs, all point in the same direction”, he completes.
Despite these conditions, Campos Neto believes that the Brazilian monetary authority has the necessary instruments to make inflation return to the established targets. “Controlling price expectations is the most fundamental variable in the economy. BC understands that it is very important to pursue the goal in a relevant horizon”, he reinforces.
For the president of the BCB, the return of greater consumption of services to the detriment of goods may not be homogeneous. However, according to him, there were no major disruptions in supply – even in relation to semiconductors – but large increases in demand. “When we look at the production during the pandemic of these goods that are suffering some shortage, production was not interrupted, but accelerated, so this is an argument that becomes more fragile”, he believes.
Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.