Impacted by fuel price advances and of the electricity bills, inflation took off from ceiling of the goal pursued by the government in recent months and the level is not expected to recover until the end of 2021.
According to economists consulted by R7, the current movements of the BC (Central Bank) to contain the advance of prices aim at 3.5% target set by the CMN (National Monetary Council) for next year, with a tolerance of 1.5 percentage points.
For this year, the target ceiling of 5.25% was drilled for the first time and March and never recovered. Currently, the IPCA (Extended National Consumer Price Index) accumulated for the last 12 months is 8.99%.
“The Central Bank’s unequivocal commitment is with the convergence of inflation to the target in the relevant horizon and the future steps of monetary policy are freely adjusted with this objective”, I point out the penultimate minutes of the monetary authority. The attempt to contain the rise in prices has already resulted in five consecutive highs in the economy’s basic interest rate, Selic.
For André Braz, economist responsible for the price indices of the Ibre/FGV (Brazilian Institute of Economics of the Getulio Vargas Foundation), when the BC (Central Bank) talks about meeting the target by justifying the recent hikes in the benchmark interest rate the focus is on containing prices as early as 2022.
“For next year, the BC has to do as much as possible to anchor expectations, because if it loses its hand again it fuels an inflationary inertia, driven by the expectation that inflation is increasingly challenging”, points out Braz, who forecasts the IPCA close to 8% at the end of the year, a percentage twice as high as the 3.5% target center
The president of Cofecon (Federal Economics Council), Antonio Corrêa de Lacerda, explains that the BC’s strategy seeks to “generate confidence” for the formation of positive opinions of the financial market. “There is an interval between the monetary policy decision and its effect. Therefore, the decisions taken now should only take effect in 2022. The price of all this will be lower GDP growth, therefore unemployment and falling income will remain,” he says he.
The latest financial market expectations point to a 7.11% rise in the IPCA (Broad National Consumer Price Index) this year. If confirmed, the value is 1.86% higher than the ceiling defended by the government.
In Lacerda’s perception, the Central Bank could adopt a “more pragmatic view” to inhibit the advance of prices, without limiting itself only to raising interest rates. “Restricting the action of oligopolies in the formation of prices, adopting regulatory stocks of cereals, for example, are feasible measures, but they will not be adopted”, points out the president of Cofecon.