Sunday, October 1, 2023

Slight increase in inflation in Brazil in August

A recent Reuters poll of analysts predicted that inflation in Brazil rose slightly in August compared to July. This increase can be attributed to the end of a one-time discount on energy prices for residential users. The survey suggested that consumer prices likely rose at a monthly rate of 0.28%, with the annual rate reaching 4.67%. This is the highest rate since February, when it stood at 5.60%.

The increase in inflation can be attributed to the increase in the regulated price of electricity and fuel. In addition, changes in tuition fees and drop in fares also affected service inflation, although their overall impact was limited. On the other hand, stable food prices helped control inflation, as Brazilian households benefited from a record harvest, which led to lower costs for animal feed and fresh produce.

While headline inflation in Brazil is lower compared to 2022, when it reached 12%, the recent increase in August, combined with the rise in long-term expectations, may lead policymakers to make a more aggressive way. The general view of private economists in weekly surveys conducted by the Brazilian central bank suggests that the inflation rate is projected at 4.93% at the end of the year, slightly higher than the previous estimate. This reflects the recent announcement of a significant increase in the price of gasoline by the state oil company Petrobras.

The Central Bank of Brazil emphasized its commitment to maintain a moderate pace of reduction in the reference Selic interest rate, by cutting 50 basis points per meeting. Although the central bank has primary responsibility for fighting inflation, missing the annual target for consumer prices could create trouble for the government of President Luiz Inacio Lula da Silva, who has received praise for economic growth this year.

In conclusion, inflation in Brazil experienced a slight increase in August, mainly due to regulated prices and changes in tuition fees. While stable food prices have helped control inflation, the overall inflation rate is expected to exceed the annual consumer price target. The Central Bank of Brazil aims to maintain a strict approach to ensure price stability and economic growth.

Nation World News Desk
Nation World News Desk
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