Prices begin to threaten to turn into permanent increases, says Guedes

The new president of the Central Bank (BC), Roberto Campos Neto, and the Minister of Economy, Paulo Guedes, during a ceremony for the transfer of office.

Fabio Rodrigues Pozzebom/Agência Brasil

Economy Minister Paulo Guedes acknowledged on Wednesday that a previously punctual and transitory rise in prices “is beginning to threaten to turn into permanent increases”. He stressed, however, that the Central Bank is already running after controlling inflation by increasing the economy’s basic interest rates.

The official inflation index, measured by the IPCA, reached 8.99% in the 12 months through July, well above the target pursued for the year, of 3.75% with 1.5 percentage point of tolerance for more or less. The market already expects inflation to break the target ceiling, which is 5.25%.

Guedes considered that inflation is rising “all over the world” and cited rising commodity prices and shrinking supply of goods and services due to covid-19 as factors behind the pressure.

The minister also criticized the repercussion given to a speech by him about the fact that energy becomes more expensive. In a hearing at the Federal Senate last Thursday, 26, Guedes said that “it’s no use sitting around crying” in view of the increase in the price of electricity, due to the water crisis.

A day earlier, another statement had already reverberated. “What’s the problem now that energy is going to get a little more expensive because it rained less?”, asked the minister on Wednesday, 25th.

This Wednesday, September 1st, Guedes tried to justify himself. “I was saying ‘don’t be discouraged, energy prices will go up a little’. ‘It’s no use crying’ was the expression I used, then they take it out of context,” he said. “The truth is that we are all fighting for Brazil,” added the minister.

According to him, there are positive aspects that should arouse optimism with the country, such as the existence of R$ 544 billion in investments already contracted for the next ten years. “It’s not power point, prediction or proposal. It is already signed”, he stressed.

He also listed the scenario of lower interest rates and a higher exchange rate, which favors exports. “We are heading towards a trade surplus of almost $100 billion for the year,” he said.

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