Itaú sees inflation of almost 7% in 2021: “Very high level”, says Mesquita

Itaú Unibanco projects inflation of 6.9% in the Extended National Consumer Price Index (IPCA) in 2021 and 3.9% in 2022. According to the institution’s chief economist, Mario Mesquita, the situation is problematic, with a peak over 9% in the 12-month period.

“We even think it will drop at the end of the year, but to almost 7%, still quite high and well above the target pursued by the BC,” said Mesquita, who participated in the morning of this Tuesday, 24th, in a press conference to present the 3rd report of Consumption Behavior Analysis, referring to the second quarter of the year.

The economist emphasizes that the monetary policy of raising interest rates is aimed at anchoring expectations for the IPCA for next year and preventing high short-term inflation from spreading into the future. Itaú projects a 7.5% Selic rate at the end of 2021.

Mario Mesquita also said that the risk of electricity rationing is an ongoing concern for Brazil’s economic activity, while the delta variant of Covid-19 appears to be less of a risk. “Inflation is problematic, with bottlenecks in the production of automobiles and electronics, and this is also affected by the energy issue,” said Mesquita, at the press conference.

For the economist, the delta variant of Covid-19 has not significantly harmed the country’s improvement, despite a localized worsening in Rio de Janeiro. “If you look at economic activity, it is clear that we have already surpassed the pre-pandemic level,” said Mesquita, based on data from Itaú’s Daily Economic Activity Indicator (Idat).

The bank projects a 5.7% growth in the Gross Domestic Product (GDP) in 2021 and 1.5% in 2022.


The chief economist at Itaú Unibanco also stated that formal employment in the country is on the path to recovery, based on data from the bank’s IDAT.

“The picture is that formal employment has returned. Unemployment is in the informal sector, and this suggests that Brazil will come out of this more unequal pandemic that has entered, with a stronger recovery in the more formal and modern sectors and weaker in others”, said Mesquita.

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