URGENT: July has the biggest drop in inflation since 1998 after a decrease in fuel and electricity prices

This Tuesday, August 09th, the IBGE, the Brazilian Institute of Geography and Statistics, released data on July inflation, which ended the month negative at 0,68%. In short, these data show the greatest deflation in history, surpassing the data for 1998, even before the government of Luiz Inácio Lula da Silva, who administered the country for more than a decade and a half. 

The fall in inflation this month occurred after the Bolsonaro government adopted policies to freeze state ICMS, which would allow a decrease in prices charged for diesel, ethanol and gasoline. Despite this, in the state of Santa Catarina (SC), the value of diesel still flirts R $ 8 and gasoline is being sold, in Vale do Itajaí, region where the cities of Brusque and Blumenau are located, at a range of R$ 5,4. With that in mind, ethanol is priced at around R$5,20. You July deflation data, i.e. the fall in inflation, surpass those of the Workers' Party (PT), the party that was responsible for administering the country for more than a decade and a half.

Another aspect that influenced the drop in July inflation, having one of the best indexes since 1998, was regarding the decrease in prices charged for electricity, that went from the scarcity level to the green flag. As of July 13, the National Electric Energy Agency (ANEEL) also approved the correction of the tax flags, which would update the amounts of fines on energy expenditures by homes. 

Falling inflation: ICMS freeze causes gasoline, ethanol and diesel to drop significantly, coinciding with elections 

The elections for President of the Republic are scheduled to take place in October and, with that in mind, the amounts charged per liter of gasoline, diesel and ethanol fell after the Bolsonaro government stated that it could not intervene in the prices of the state-owned Petrobras. 

In the year 2021, more than twenty Brazilian states were charging more than R$7 per liter of gasoline. However, after the freezing of ICMS charges by the states, which can cause a billionaire deficit for the public coffers, fell by more than R$ 2 per liter! Truck drivers are still disadvantaged, as diesel is on the fuel list with the highest price. More than 10% of logistics sector inflation will not be passed on to the final consumer. 

Despite the drop in inflation, accumulated is still in double digits and worries the economy 

Accumulated inflation in the last twelve months is 10,07%, according to the IBGE this Tuesday, August 09th. A way found by the Central Bank of Brazil to control inflation rates was the increase in the Selic rate, which makes direct Treasury investments more profitable and the government receives more investments both from Brazilians and abroad, encouraging investors to save money and not let it circulate. 

Dollar falls with the release of IPCA and inflation data

With the Central Bank's expectations of inflation ending the year 2022 at 7% and with the deflation data released today, the dollar is showing a sharp drop being quoted at around R$ 5,11 after ending the trading session being traded at around R$ $5,17. Since the end of last year, the US currency was flirting with R$ 6, which directly impacted fuel prices because Petrobras charges in dollars.