The IPCA will reach 8.8% and will exceed the target ceiling in 2022. Check the other results of the Inflation Report.
Estimated reading time: 4 minutes
The Inflation Report, published recently, pointed out that the inflation ceiling will be exceeded in 2022 for the second year in a row. According to the Central Bank, the chance of the IPCA (Ample National Consumer Price Index) surpassing the target reached 100%.
The inflation target is determined by the National Monetary Council (CMN). For this year, the expectation was 3.5%, with a margin of error of 1.5%. That is, inflation could be between 2% and 5%. However, the report estimates that the IPCA should reach 8.8%.
For next year, the CMN projects an inflation of 3.5%. The BC expects the IPCA to reach 4% and 2.7% in 2024.
In cases where the inflation target is exceeded, the Central Bank is obliged to write a letter with the reasons. The last time this happened was at the beginning of this year, when the IPCA reached 10.06%, the highest percentage since 2015. In the letter, Roberto Campos Neto, president of the BC, used as justifications the lack of inputs with the Covid pandemic -19, the rise in commodities and the water crisis.
According to published information, the Gross Domestic Product (GDP) should grow 1.7% this year. The projection of the trade balance surplus went from US$ 83 billion to US$ 86 billion. Bank credit is expected to increase 11.9%, compared to the previous forecast of 8.9%. While the estimated surplus of external accounts showed a drop of US$ 1 billion.
The release of the report was delayed due to the strike by Central Bank employees.
The IPCA (Broad Consumer Price Index) is calculated by the IBGE (Brazilian Institute of Geography and Statistics). Its purpose is to present price variations of various items and services on a monthly basis.
More than 300 products are analyzed, according to the POF (Family Budget Survey), which records what families consume. The items examined are divided into nine groups: housing, food and beverage, clothing, transportation, household items, health, expenses, communication and education.
For the survey, the IPCA checks prices in 10 metropolitan regions of the country. The definition of the general index is based on a weighted average of prices, which considers monthly variations.
The Selic is the basic interest rate, used as a basis for loans by banks. It is a reference for the cost of credit in Brazil. The Central Bank is responsible for setting the rate, which takes place 8 times a year, based on an analysis of the country’s economy, with a focus on inflation.
When the Selic rate increases, it becomes more expensive to borrow money, consequently the population starts to spend less and inflation tends to decrease. For this reason, the Selic rate is one of the tools used to try to stop the inflation rate.
Finally, according to the Central Bank, it is likely that the basic interest rate will remain at a high level for longer than expected.
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