The prolonged water crisis, increased demand for services and uncertainties in fiscal policy management should force new upward revisions in estimates in inflation from the country. In this scenario, the number of analysts who see the IPCA (Broad National Consumer Price Index) grows at the end of the year with a variation close to 8% in the 12-month accumulated period.
In the Focus Bulletin, from BC (Central Bank), which consolidates analyzes of more than 130 financial houses, projections are still far from that point. In the most recent survey, published on Monday (23), the market median for the official inflation indicator was 7.11% for this year.
However, analysts point out that new revisions tend to take place in the coming weeks, given the rapid advance in prices that weighs on the indicator. This perspective gained strength this Wednesday (25), after the disclosure of the IPCA-15 (Extended National Consumer Price Index 15).
The IPCA-15 signals the trend for prices and, therefore, is known as a preview of the official inflation index, the IPCA. In the August survey, the indicator accelerated to 0.89%. It is the highest rate for the month since 2002, according to the IBGE (Brazilian Institute of Geography and Statistics).
As a result, the IPCA-15 reached 9.30% for the accumulated 12-month period. In other words, it registers a variation higher than the inflation target pursued by the BC for the IPCA. The target ceiling in 2021 is 5.25%. The center is 3.75%.
Economist André Braz, from FGV Ibre (Brazilian Institute of Economics of the Getulio Vargas Foundation), says that the IPCA should close the year below the level of 9% due to “a base effect”.
“We had a very strong IPCA at the end of last year. This deceleration, probably starting in October, is a base effect”, he stresses.
Despite this, Braz emphasizes that the picture is worrying. He projects inflation of 7.8% in the accumulated result for 2021 and says that the indicator could be higher, even closer to 8%, in case of aggravation of the water crisis and of new fiscal noises involving the federal government.
“Yes, it’s possible [IPCA de 8%]. We may have a new readjustment at red flag level 2, and noise about fiscal policy may generate even more persistent effects”, comments Braz.
“The feeling is that inflation is spreading. Poor and rich are noticing the rise. Inflation is no longer just associated with food. There is also the issue of energy, and fuels are under considerable pressure”, he points out.
The rise in the IPCA-15 in August was driven by electricity, which rose 5%. The more expensive electricity bill is a reflection of the water crisis, which raises energy generation costs.
Economist Thiago de Moraes Moreira, professor at Ibmec/RJ and UFRJ, also believes that the framework should force new revisions in market estimates for inflation in 2021.
In addition to the water crisis, the increased demand for services, with the reopening of companies in the sector, could generate an additional impact until the end of the year, says Moreira. Thus, it is more likely that the indicator will touch 8% rather than 7%, concludes the economist.
“People were isolated for a long time, avoiding going to restaurants or other types of services. With greater circulation, companies in the sector, even because of the difficulties they experienced during the pandemic, may increase prices”, he observes.
“Today, there are more factors that can bring inflation closer to 8% than to 7%”, he completes.
The median of market projections for the IPCA rose in the last 20 weeks, reaching 7.11% of the most recent edition of Focus. Within the report, the highest forecast is already above the 8% house, at 8.49%. The lowest is 6.35%. The survey had 133 respondents—the estimate for each is not detailed.
This Wednesday, after the release of the preview of inflation, Ativa Investimentos increased its forecast for the IPCA in 2021. The projection jumped from 7% to 7.5%.
“Our biggest revision was due to the possibility of readjusting the tariff flag again”, indicated Ativa in a note.
For now, investment manager Rio Bravo estimates a 7.4% increase in the 2021 IPCA, but it should raise the forecast to close to 8% soon. João Leal, an economist at Rio Bravo, reports that the likely revision is associated with the risks of the water crisis, the pressure on services and the noise surrounding fiscal policy.
“We have several factors that push inflation up”, defines Leal.
On Monday, minister Paulo Guedes (Economy) said that there is no lack of control over inflation in the country. “There is no lack of control. Inflation is rising all over the world,” he said.
On this Wednesday, Guedes reported that, due to the increase in court orders (debts of the Union recognized by the courts) and the high inflation, may be forced to breach the spending ceiling in 2022.