Press "Enter" to skip to content

Inflation in Brazil pierces the ceiling of the official goal and reaches 6.1%

Twelve-month inflation in Brazil pierced the ceiling of the official target in March, reaching 6.1%, a figure that adds a new headache to the government amid a tragic second wave of coronavirus.

The consumer price index jumped from the 5.2% registered at twelve months in February, and exceeded the ceiling of the Central Bank (BCB) target of 5.25%.

This makes the forecasts that the BCB will increase the basic interest rate for the second consecutive time at its next meeting in May, according to analysts, almost certain.

A hike in the benchmark rate would serve to put a stop to the rise in prices, but it could also limit credit and make it even more difficult to grow an economy that already has problems, amid an escalation of infections and deaths from covid- 19.

“The Central Bank is clearly concerned with inflation above the target ceiling and it seems likely that the benchmark rate will raise another 0.75 percentage points at its next meeting in May,” said consulting firm Capital Economics.

Monthly inflation was 0.93%, the highest value for a month of March since 2015, reported the Brazilian Institute of Statistics (IBGE).

The central bank’s inflation target is 3.75%, with a tolerance margin of 1.5 percentage points down or up.

The rise in prices led the Central Bank to raise its benchmark rate above expectations last month, 0.75 percentage points, after holding it at a historic low of 2% for seven months, in an attempt to mitigate the effects of the pandemic in the economy.

Brazilian GDP fell 4.1% last year, its third worst contraction in the country’s history, although it fared better than other large economies.

It is expected to regain some ground this year, although this outlook is being increasingly clouded by the explosion of covid-19 cases.

In the latest Focus survey conducted by the Central Bank, market players forecast a 3.17% growth in GDP this year, compared to 3.26% a month ago.

The second wave of the pandemic has brought to critical levels the occupation of hospitals in practically the entire country, of 212 million inhabitants and that registered an average of 2,820 deaths per day in the last week.

The virus has so far claimed more than 345,000 lives in Brazil, second only to the United States.

The far-right president Jair Bolsonaro, who has criticized the confinement measures, the use of masks and even vaccines, faces increasing pressure on his management of the pandemic, including from the business sector.


Read more

Be First to Comment

Leave a Reply

Your email address will not be published. Required fields are marked *