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The projection of the National Consumer Price Index (INPC) fell by 4.8% and 4.5%.

 

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Estadão Content

Sep 27, 2023 5:45 pm

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Updated 13 hours ago

Inflation

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The Institute for Applied Economic Research (Ipea) reduced its projections for Brazilian inflation in 2023 this Wednesday, 27th. The estimate for the Broad National Consumer Price Index (IPCA) went from 5.1% to 4.9 %, while the National Consumer Price Index (INPC) fell by 4.8% and 4.5%. Both indicators are calculated by the Brazilian Institute of Geography and Statistics (IBGE).

 

“Despite the stronger expected rise in administered prices, the more benevolent behavior of free prices made it possible to reduce inflation forecasts,” explained Ipea, in a note.

 

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In the IPCA, used as a reference for the inflation targeting system pursued by the Central Bank, monitored prices were revised from an increase of 7.9% to 10% in 2023. However, projections for all other components decreased: food at home it went from an increase of 3.7% to a drop of 0.7%; free goods (except food), increasing from 2.4% to 2.2%; and services, increasing from 5.6% to 5.1% (education, from 8.5% to 8.3%, and other services, from 5.1% to 4.6%).

 

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“Over the last quarter, the inflation scenario in the country once again surprised favorably, even in the face of an acceleration in consumer price indices accumulated over twelve months. After registering an increase of just 3.2% in June, the Brazilian twelve-month inflation curve, measured by the IPCA, advanced to 4.6% in August, reflecting the reversal – already expected – of the deflation trajectory of administered prices .

 

Certainly, the statistical effect resulting from the exclusion of the strong falls in administered prices in June and July 2022 – due to the exemptions and tariff changes that occurred in this period last year – caused the inflation rate in this segment, accumulated over twelve months , jumped from -1.3%, in June, to 7.7%, in August”, pointed out the Ipea Situation Letter. “On the other hand, the better performance than previously projected for free prices, especially for food at home, offset, at least in part, the rise in administered prices, preventing an even more significant increase in the IPCA”, he added.

 

In the INPC - which calculates the inflation perceived by the lowest-income families, with an income of one to five minimum wages -, the monitored prices were revised from an increase of 7.6% to 9.7% in 2023; food at home, from a rise of 3.5% to a fall of 0.8%; free goods (except food), increasing from 2.7% to 2.6%; and services, increasing from 5.7% to 5.3% (education, from 8.3% to 8.2%, and other services, from 5.3% to 4.9%).

 

“Finally, the balance of risks for the consolidation of this scenario of better-behaved projections does not rule out the emergence of additional pockets of inflationary pressure, associated, above all, with stronger changes in the trajectory of commodities, especially energy, in the international market , and the more intense acceleration of the exchange rate. Additionally, the suspension of Russian diesel oil exports could constitute an important point of compression on freight costs, therefore impacting the inflation of food and industrial goods”, considered Ipea.