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Rising inflation in Brazil, driven by the high cost of food, is worrying experts and affecting the Brazilian economy. The impact on families' pockets is increasingly evident.
Inflation in Brazil has once again become a concern for experts and consumers. According to data released by IBGE, the Broad National Consumer Price Index (IPCA) rose from 0,44% in September to 0,56% in October, accumulating 4,76% in the last 12 months. The index surpassed the ceiling of the target set by the Central Bank, putting the Brazilian economy on alert. This increase is attributed mainly to the rise in food and electricity prices, in addition to the appreciation of the dollar.
As the end of the year approaches, the inflationary scenario becomes more complicated, and experts warn that the situation could remain challenging in 2024 and 2025. Let's understand the factors that are driving inflation and what the projections are for the coming months.
What is driving up inflation in Brazil?
Inflation in Brazil has several causes, but some factors are more decisive. In October, meat prices rose 5,81%, the highest increase in four years, boosting the HICP. Additionally, the increase in electricity prices, driven by the yellow tariff flag, and the appreciation of the dollar against the real, which has already accumulated a 17% increase this year, contributed considerably to the rise in prices.
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According to economist Luiz Roberto Cunha, from PUC-Rio, the exchange rate has a direct impact on domestic prices, especially on imported products and agricultural inputs. With the dollar reaching R$5,77, production and distribution costs increase, putting pressure on the final price of products in retail.
Predictions for 2025
The forecast for 2025 is not very good. Despite the expectation of a record harvest, analysts indicate that food prices should continue to rise due to a combination of factors such as the high exchange rate and the mismatch between supply and demand. Sergio Vale, chief economist at MB Associados, highlights that food will be the main risk variable for inflation in the coming years.
This increase may be felt even more during the holiday season, when demand for food traditionally increases. In addition, seasonal and climatic factors can aggravate the situation, making it difficult to control inflation.
Measures to contain inflation
With inflation in Brazil above the target, the Central Bank has adopted a more rigid stance. The institution recently decided to raise interest rates by 0,5 percentage points in an attempt to contain the rise in prices. According to Sergio Vale, this measure is correct, but it will not be enough if the government does not present a robust fiscal package.
The need for fiscal adjustments is also highlighted by experts. The government, led by Minister Fernando Haddad and the President of central bank, Roberto Campos Neto, faces the challenge of balancing public accounts and ensuring economic stability. A well-structured fiscal package could help contain inflationary pressure and stabilize the exchange rate, reducing the impact of the high dollar on domestic prices.
Electricity and hope for the IPCA
One piece of news that could temporarily ease inflation is the reduction in the fare electricity. With the change of the tariff flag from yellow to green scheduled for December, a drop in prices is expected.
According to economist Luiz Roberto Cunha, this change could result in the IPCA in November being around 0,20%. Despite this, the reduction in the electricity bill should not be enough to bring the annual index below the target ceiling.
The global scenario also has a direct impact on the Brazilian economy. Donald Trump's recent victory in the US presidential election has brought uncertainty to American economic policy, with forecasts of a stronger dollar. This trend could worsen inflation in Brazil, further increasing the cost of imported goods.
The geopolitical environment, including tensions between Russia and Ukraine and climate challenges, also affects commodity and input prices. The Brazilian Central Bank monitors these factors closely, adjusting its monetary policy as needed.
Projections for 2024 and 2025
Projections indicate that inflation in Brazil should remain above the target center in 2024 and 2025. Economist Sergio Vale estimates that the IPCA will close 2024 at around 4,7%, with an average variation of 0,38% between November and December of this year. For the following years, expectations remain above 4%, requiring continued measures from the government to stabilize the economy.
Vale emphasizes that, without a robust fiscal package, inflationary pressure will persist. “It is up to the government to seek a different outcome for this situation,” concludes the economist.
Rising inflation in Brazil is a challenge that requires attention and coordinated action between the Central Bank and the federal government. With the IPCA accumulated over 12 months exceeding the target ceiling, it is essential that fiscal and monetary measures be adopted to contain the pressure on prices.
The coming year will be crucial for the Brazilian economy, with particular emphasis on the food and energy sectors, which will continue to impact consumers' pockets. Stay alert to changes in the economic scenario and prepare for possible price adjustments. After all, inflation is a barometer of the country's economic health and directly affects the daily lives of all Brazilians.
This article was produced with information from the newspaper The Globe.
Indeed, although I am not an economist, I agree with everything. However, the government's party of spending without limits to accommodate all its comrades, useless ministries, lavish trips and widespread corruption, which is not new, will take the nation to rock bottom. And those who live will see.